Skip to main content Menu with new notification Skip to footer

Gap between cost of renting and buying narrows as house prices rise

11th June 2013

  • Owning home still 13% cheaper than renting on average across UK
  • But buying is now 3.2% more expensive than this time last year
  • Renting average 2-bed flat is £961 per year more expensive than owning
  • York is most cost effective to buy whilst Plymouth is cheaper to rent

Although buying a property remains 13% more cost-effective than renting, the gap is narrowing as house prices are on the rise again, according to the latest research by property search website Zoopla.co.uk.

One year ago, renting in the UK was £993 per year on average more expensive than servicing a mortgage, but this gap has now come down by 3.2% to £961 today. As a result, the proportion of towns and cities across the UK where it is cheaper to buy than rent has fallen from 90% to 86% over the past twelve months.

The main cause of the narrowing gap has been that house prices have climbed at a faster pace over the past year than rents with the cost of renting a two-bedroom flat across Britain is now £84 (1.1%) more expensive on average than last year, whereas the cost of servicing an interest-only mortgage on a typical two-bedroom flat has risen £120 (1.7%) on average.

Despite the narrowing gap, it is still 13% cheaper to own than to rent. The average rental payment on a typical two-bedroom flat is £8,006 per year, compared to £7,045 per year to service an interest-only mortgage at a 5% rate. Using a 90% LTV interest-only mortgage at a typical Best Buy rate of 4.39%. , the rental premium is even higher with the average mortgage at £126,817 and interest of £464 per month, saving an owner £2,439 a year (not including cost of deposit).

Weaker house price growth in the north has meant that northern towns dominate the list of places where it is cheaper to buy than rent with York topping the list and where tenants pay a £3,326 (42%) annual premium over owners.

Higher property prices in the south have led to a number of places where it is cheaper to rent instead of buying with Plymouth topping the list and where tenants in the seaside town pay £845 (15%) per year less than owners on average. Despite the high rents in London, property price rises over the past year in the capital have now made renting 6% more cost-effective than buying.

Lawrence Hall of Zoopla.co.uk comments: “Buying remains significantly more cost-effective than renting, but the gap is closing. With increased mortgage availability buyer demand is rising, especially amongst first time buyers, whilst rental demand is falling so house prices are generally rising faster than average rents, although it is clear that large regional differences still exist.”

Top 5 locations where buying beats renting

Rank Location Avg. Monthly Rent* Avg. Asking Price* Rental Premium**
1 York £940 £159,079 41.8%
2 Derby £563 £95,774 41.1%
3 Coventry £611 £105,578 38.9%
4 Hull £503 £87,769 37.5%
5 Bradford £507 £89,173 36.5%

Source: Zoopla.co.uk

* Based on 2 bedroom flats on the market for sale/rent in May 2013

** % variance between average monthly rent and average monthly cost of 5% p.a. interest-only mortgage

Top 5 locations where renting rules

Rank Location Avg. Monthly Rent* Avg. Asking Price* Rental Discount**
1 Plymouth £581 £163,207 -14.6%
2 Swansea £650 £172,914 -9.8%
3 Bournemouth £776 £205,491 -9.4%
4 London £2,427 £616,542 -5.5%
5 Stockport £585 £145,110 -3.2%

Source: Zoopla.co.uk

* Based on 2 bedroom flats on the market for sale/rent in May 2013

** % variance between average monthly rent and average monthly cost of 5% p.a. interest-only mortgage

Zoopla.co.uk Top 50 Rent vs Buy Index May 2013

Rank City Av. Monthly Rent Average Asking Price Rent / Buy Ratio Rent / Buy
1 Plymouth £581 £163,207 1.17 Rent
2 Swansea £650 £172,914 1.11 Rent
3 Bournemouth £776 £205,491 1.10 Rent
4 London £2,427 £616,542 1.06 Rent
5 Stockport £585 £145,110 1.03 Rent
6 Brighton £1,101 £266,579 1.01 Rent
7 Wigan £451 £108,507 1.00 Rent
8 Oldham £477 £113,525 0.99 Buy
9 Bristol £732 £170,738 0.97 Buy
10 Edinburgh £724 £165,969 0.96 Buy
11 Huddersfield £520 £118,516 0.95 Buy
12 Cambridge £1,118 £249,829 0.93 Buy
13 Wolverhampton £503 £111,719 0.93 Buy
14 Lincoln £529 £116,902 0.92 Buy
15 Dundee £507 £111,499 0.92 Buy
16 Cardiff £672 £147,409 0.91 Buy
17 Barnsley £416 £91,073 0.91 Buy
18 Rotherham £442 £95,969 0.90 Buy
19 Bedford £633 £137,144 0.90 Buy
20 Liverpool £607 £130,480 0.90 Buy
21 Middlesbrough £520 £111,423 0.89 Buy
22 Southampton £741 £157,774 0.89 Buy
23 Newcastle £615 £128,902 0.87 Buy
24 Warrington £563 £117,056 0.87 Buy
25 Sheffield £568 £117,958 0.87 Buy
26 Norwich £654 £135,743 0.86 Buy
27 Bolton £468 £96,870 0.86 Buy
28 Leeds £659 £135,748 0.86 Buy
29 Walsall £490 £99,810 0.85 Buy
30 Manchester £728 £147,832 0.85 Buy
31 Colchester £689 £135,724 0.82 Buy
32 Preston £559 £107,998 0.80 Buy
33 Aberdeen £854 £164,983 0.80 Buy
34 Doncaster £494 £94,772 0.80 Buy
35 Ipswich £607 £114,595 0.79 Buy
36 Leicester £576 £108,467 0.78 Buy
37 Glasgow £568 £106,821 0.78 Buy
38 Reading £1,036 £192,807 0.78 Buy
39 Stoke-on-Trent £507 £94,316 0.78 Buy
40 Peterborough £572 £104,689 0.76 Buy
41 Nottingham £633 £114,698 0.75 Buy
42 Milton Keynes £789 £142,588 0.75 Buy
43 Northampton £598 £106,908 0.74 Buy
44 Birmingham £702 £124,999 0.74 Buy
45 Swindon £594 £105,430 0.74 Buy
46 Bradford £507 £89,173 0.73 Buy
47 Hull £503 £87,769 0.73 Buy
48 Coventry £611 £105,578 0.72 Buy
49 Derby £563 £95,774 0.71 Buy
50 York £940 £159,079 0.71 Buy

Source: Zoopla.co.uk

* Based on 2 bedroom flats on the market for sale/rent in May 2013

** % variance between average monthly rent and average monthly cost of 5% p.a. interest-only mortgage

- Ends -

For further information, please contact Tim Vooght at pr@zoopla.co.uk or on 020 3872 5615.

Notes to editors

Zoopla is the UK's most comprehensive property website, focused on empowering users with the resources they need to make better-informed property decisions. We help consumers both find their next home and research the market by combining hundreds of thousands of property listings with market data, local information and community tools.

At Zoopla we are fans of transparency and everything we do is aimed at making the market more efficient for both property consumers and advertisers alike. Zoopla has rapidly become the UK’s leading online destination for property consumers to search for homes and do their market research and the favoured online marketing partner for UK estate agents, letting agents and property developers.

Launched in 2008, Zoopla has since been one of the fastest growing websites in the UK, now attracting over 40 million visits per month and we are proud to have collected numerous awards and accolades along the way, including being named one of the Top 10 UK Tech Companies (Guardian) and one of the Top 10 Most Innovative UK Companies (Smarta).

Zoopla is part of Zoopla Limited which was founded in 2007.

Zoopla Limited, The Cooperage, 5 Copper Row, London, SE1 2LH
Registered in England and Wales with Company No. 09005884
VAT Registration number: 191 2231 33
Data Protection number: Z9972266

Back to Press releases