Renting a Property Becomes Cheaper Than Buying

Buying a property has been cheaper than renting for the past five years.

In March 2020, a home buyer with a 10% deposit would have saved £102 per month by buying a property compared to renting.

With demand outstripping supply property prices are at their highest level, this trend for buying being cheaper than renting has now changed with the average first time buyer will now find renting cheaper than buying, despite a 7.1% increase in rent over the past 12-months according to research by Hamptons.

In May 2021, it was 7% (£71 per month) more expensive for a first time buyer with a 10% deposit to purchase a property, compared to renting. The average monthly mortgage repayment would be £1,125 compared to £1,054 in rent.

With the re-introduction of 95% mortgages, renting becomes even more cheaper than buying for those with just a 5% deposit, spending on average £195 per month (19%) more than if they were renting.

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Regional Variations

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It was cheaper to buy versus renting in every region of the UK in early 2020, whereas in May 2021, it became cheaper to rent in sever of the eleven regions in the UK.

With decreases in rent in London, renting became significantly cheaper than buying by the largest amount than any other region and as rents continue to fall, this disparity is set to become more prominent.

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Impact on the Rental Market

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With UK property prices forecast to increase by 21.1% in the 5-years to 2025 by Savills, this will inevitably increase the difference in affordability of renting versus buying, especially in regions such as the North West of England with prices set to increase by 28.8%.

The limited supply of rental property will also see rental appreciation over the same period, which is excellent news for savvy buy-to-let property investors, who will be able to capitalise from both increasing rent and property prices.

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