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Buying a home cheaper than renting in almost two-thirds of Britain's cities - if you can raise the deposit


11-01-2016


By Jonathon Hopkins for Thisismoney.co.uk

Buying a home is more cost-effective than renting in nearly two-thirds of Britain's major cities, research shows, with Glasgow home owners particularly faring well.

Och aye: Buying a home is more cost-effective than renting in nearly two-thirds of Britain's major cities, research shows, with Glasgow home owners particularly faring well
Property website Zoopla compared the average monthly rents being asked for a two-bedroom home across 50 cities with the cost of paying a mortgage on a similar-sized property with a 10 per cent deposit - the size of deposit often put down by first-time buyers.


It found that in 60 per cent of cities, buying a home was more cost-effective than renting one. The proportion has increased since April, when buying was more cost-effective than renting in 48 per cent of cities.


Among the cities standing out, mortgage payers in Glasgow may find themselves parting with an average of £450 per month, while renters there fork out an average of £596 - a difference of £146.


Och aye: Buying a home is more cost-effective than renting in nearly two-thirds of Britain's major cities, research shows, with Glasgow home owners particularly faring well


Owning a home in Birmingham and Bradford rather than renting one was also found to be particularly cost-effective.


But in southern England, where house prices can be particularly high, renting often works out cheaper. London was found to be the city where renting was particularly likely to beat buying, in terms of the monthly costs, followed by Cambridge and Bournemouth.


In London, renting can work out £1,118 cheaper per month than having a mortgage, while in Cambridge the cost difference per month can work out at £549.


The research assumed that a mortgage holder would be on a 25-year repayment deal with a fixed interest rate of 4.5 per cent to make the findings.


Zoopla also analysed the current asking prices and rents of two-bedroom properties currently on the market across Britain's 50 biggest cities for the research.


Lawrence Hall, a spokesman for Zoopla, said: ‘Buying a property is a costly process, but once you get past the initial fees, it can - as our data shows - prove a more economical option on a monthly basis.


‘Although large parts of Britain remain unaffordable for those looking to take their first steps on to or another step up the property ladder, these latest figures tell an encouraging story.


‘Whereas back in April it was cheaper to service a monthly mortgage than pay a rental fee in just under half of Britain's biggest cities, buyers are now offered better value in nearly two-thirds of these locations.’


THE TOP 10 UK CITIES WHERE BUYING BEATS RENTING


Here are the top 10 cities where buying beats renting, according to Zoopla, with the average monthly rent followed by the monthly mortgage payment based on someone having a 10 per cent deposit, and rental premium in percentage terms. 


The percentage premium has been calculated by Zoopla as the percentage difference between median monthly rent and the average monthly mortgage repayment. Percentages have been rounded:


                                RENT                      MORTGAGE                  PERCENTAGE 
1. Glasgow                 £596                          £450                                28%
2. Birmingham             £826                         £650                                 24%
3. Bradford                 £500                          £397                                23%
4. Coventry                 £804                         £650                                 21%
5. Nottingham             £696                         £575                                 19%
6. Dundee                  £526                          £448                                 16%
7. Barnsley                 £452                          £400                                 12%
8. Middlesbrough        £500                          £443                                 12%
9. Leeds                     £704                          £625                                 12%
10. Peterborough         £696                         £625                                 11% 

A typical property in Britain added £3,000 of value in August despite worries over the potential impact of the EU referendum vote, shows this morning.


The value of the average home in Britain was £219,000 in August, according to data released by the Office for National Statistics earlier this month, £17,000 more than the same month last year with annual price inflation rising to 8.4 per cent, a touch higher than the rate recorded in July.


In Scotland, the average price increased 4.3 per cent and in Wales a slimmer 2.7 per cent.


Regionally, the East of England is the region which showed the highest annual growth, with prices increasing by 13.3 per cent.


Growth in the South East was second highest at 12.2 per cent, followed by London at 12.1 per cent.

To buy, or not to buy: Zoopla found that in 60 per cent of cities, buying a home was more cost-effective than renting one. The proportion has increased  from 48 per cent of cities in April
To buy, or not to buy: Zoopla found that in 60 per cent of cities, buying a home was more cost-effective than renting one. The proportion has increased  from 48 per cent of cities in April


However, although the cost of buying a home is still increasing, the amount needed to service a mortgage on it has been diminishing, particularly in the wake of the Bank of England’s move to trim interest rates to fresh all-time lows in the wake of June’s shock UK referendum decision to quit the European Union.


Meanwhile, the Brexit vote uncertainties have kept the supply of homes being sold low, while a government move to hike taxes on buy-to-let purchases earlier this year has also helped put pressure on the rental market as supply and demand factors continue to be squeezed.


In an attempt to help alleviate supply issues, a newspaper reported today that ministers are planning a new wave of prefabricated housing in a drive to solve Britain's housing crisis.


More than 100,000 pre-packed ‘modular’ homes could be constructed up as the Government looks at ways to meet its target to provide 1 million new homes by 2020, according to The Sunday Telegraph.


THE TOP 10 UK CITIES WHERE RENTING BEATS BUYING


And here Are the top 10 cities where renting beats buying, according to Zoopla, with the average monthly rent followed by the monthly mortgage repayment based on someone with a 10 per cent deposit, and buying premium in percentage terms:


                                             RENT                MORTGAGE                PERCENTAGE 
1. London                         £2,009                  £3,127                               44%
2. Cambridge                    £1,152                   £1,701                              38%
3. Bournemouth                £852                      £1,126                              28%
4. Aberdeen                      £726                     £925                                 24%
5. Brighton                      £1,218                    £1,501                              21%
6. Reading                        £1,104                  £1,351                               20%
7. Bedford                        £804                     £975                                 19%
8. Liverpool                      £626                      £750                                18%
9. Colchester                     £752                     £850                               12%
10. Southampton              £804                     £900                                 11% 

A Government white paper due out next month will include measures to encourage banks to lend to firms which construct the homes off-site before delivering them to their final destination, the paper said.

The initiative recalls the reconstruction drive which followed the Second World War as ‘prefabs’ sprung up across the country as the government sought to house families bombed out of their homes by the Germans.

While the prefabs of the 1940 homes were often a byword for poor quality, improvements in technology mean that such concerns are no longer an issue.

Ministers were said to have been impressed the fact that some of the new generation of prefabs could be put up on site in as little as 24 hours, as well as the potential cost advantages. 

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