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Cheaper to rent than buy in a third of UK cities

8th October 2015

  • Mortgage payments less expensive than monthly rent in 36% of British cities
  • Buying most cost-effective up north – as homeowners in Glasgow are more than £100 per month better-off than their renting counterparts
  • Down south, however, renting still beats buying, with property purchasers in London, Reading & Cambridge forking out hundreds more to own property there
  • Nationwide, renters still pay £58 less per month than buyers

Purchasing a property is more cost-effective than renting in more than a third of British cities, according to the latest research by property search website Zoopla.co.uk.

Zoopla’s analysis of the cost of renting a two-bedroom home compared to servicing a mortgage reveals that buying works out cheaper than renting in 36% of cities in the UK on a month-by-month basis.

Property purchasers did particularly well compared to their renting counterparts in Scotland and the North of England. In Glasgow, rental payments amount to an average of £596 per month, whereas monthly mortgage payments only totaled £447. This means Glaswegian buyers are paying 25% – or £149 – a month less to own property than rent it. In Hull, buyers – who pay on average £397 a month – are £55 better off than renters in the city who pay an average of £452 per month to rent.

Conversely, the south eastern corner of the UK represents the best value-for-money for renters. The average London tenant pays rent to the tune of £2,218 per month, whereas the capital’s home-owners shell out an average of £3,302 on servicing their mortgages, meaning buyers there are paying 49% – or £1,084 a month – more than the city’s renters. Buyers in Reading and Cambridge can also expect to pay a hefty monthly premium for the privilege of home owning. On average, owners in Reading typically pay £3,600 a year more than tenants, while servicing a mortgage in Cambridge costs £3,700 more a year on average. Nationwide, the current average asking rent for a two-bedroom home is £666 per month, compared to an average asking price of £145,840. As a result, servicing a 90% LTV mortgage typically costs £58 more per month than the average tenant would pay for renting such a property.

Lawrence Hall of Zoopla.co.uk said: “Aside from the initial deposit, and all the fees associated with the actual house purchase, the financial strain of buying can be overstated. In addition to the peace of mind that homebuying brings, many owners enjoy more disposable income at the end of every month than their renting counterparts. If they can make the leap, and are willing to relinquish the flexibility that comes with renting, tenants up north in particular would be much better off buying and paying off a mortgage every month. Scotland and the North of England are cementing their standing as international university hubs – boasting seats of learning such as York, Edinburgh and Durham. This means increasingly high numbers of students are flock to these areas – all looking for places to stay and driving up rents as a result.

“London and the South East are by no means cheap places to rent either. However, growing pressure on housing supply in this corner of the UK from professionals, families and overseas investors means that getting a foothold onto the property ladder in these areas is only becoming a more costly endeavor, and the mortgage payments attached to this are rising to bridge this gap.”

Top 10 locations where renting beats buying

Rank Location Median Monthly Rent Median Asking Price Avg. Monthly Mortgage Payment Buying Premium
1 LONDON £2,218 £665,000 £3,302 50%
2 READING £1,041 £270,000 £1,341 29%
3 CAMBRIDGE £1,104 £285,000 £1,415 28%
4 BRIGHTON £1,252 £315,000 £1,564 25%
5 ABERDEEN £904 £225,000 £1,117 24%
6 BRISTOL £878 £213,473 £1,060 21%
7 NORWICH £659 £160,000 £795 21%
8 YORK £796 £183,973 £914 15%
9 BEDFORD £752 £173,478 £861 15%
10 SOUTHAMPTON £804 £184,950 £918 14%
Source: Zoopla.co.uk (September 2015)

Top 10 locations where buying beats renting

Rank Location Average Monthly Rent Average Asking Price Avg. Monthly Mortgage Payment Rental Premium
1 GLASGOW £596 £90,000 £447 33%
2 DUNDEE £522 £83,000 £412 27%
3 BIRMINGHAM £678 £116,950 £581 17%
4 HULL £452 £80,000 £397 14%
5 MANCHESTER £600 £110,000 £546 10%
6 COVENTRY £652 £119,950 £596 10%
7 EDINBURGH £852 £159,000 £790 8%
8 ROTHERHAM £426 £80,000 £397 7%
9 BRADFORD £452 £85,000 £422 7%
10 SHEFFIELD £552 £105,000 £521 6%
Source: Zoopla.co.uk (September 2015)

Methodology

  • To compare the cost of buying versus renting, Zoopla analysed the current asking prices and rents of two-bedroom properties currently on the market, assuming a typical first-time buyer home.
  • We assume a 25-year mortgage with repayment and a fixed interest rate at the current average best buy rate of 4.5%, based on 90% LTV ratio for a fair and simple comparison to renting without the need to assume renters’ monthly personal savings.
  • [1] Based on an average of Moneyfacts’ Best Buy mortgages, September 2015

    - Ends -

    For further information, please contact PR Team on pr@zoopla.co.uk or +44 (0)20 3873 8770.

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