Cost of buying a home now cheaper than renting

With a generation of young would-be buyers dubbed “rentysomethings”, many long-term tenants aged between 25 and 35 can only dream about getting on to the property ladder.

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According to the Halifax Buying vs. Renting Review, buying a home is on average almost a fifth lower than renting.

While the average monthly cost for renting a three bedroom house stood at £732 in June 2012, the average monthly costs for buying the same home would be £600 – a difference of 18%.

Further figures from the survey revealed that while the last year has seen buying costs fall by 3%, the cost of renting has increased by 5%.

The research also found that the buying landscape has changed considerably over the last four years. In 2008, average monthly home buying costs (£1,048) outstripped monthly rentals costs (£724) by 45%.

In terms of the proportion of average UK disposable income used for buying or renting, the landscape changed considerably since the economic downturn started in 2008.

In 2008 monthly home buying costs were more than half of the average disposable income, compared to a current figure of 29%. In contrast, renters have to earmark more of their disposable (35%) to meet housing costs compared to homeowners.

“It is clearly encouraging that there has been a significant decline in the cost of buying a home for those able to enter the housing market since 2008,” said Martin Ellis, a housing economist at Halifax.

“The improvement is due to a combination of lower mortgage rates and declining house prices. In contrast, market conditions for renters have deteriorated as rents have risen in the past two years.”

Posted by: WarrenWilson Categories: Buying, Estate Agents, Letting, Renting, Selling Tags: , 5 Comments

5 Responses to Cost of buying a home now cheaper than renting

  1. avatar Stuart says:

    This is all well and good providing you can provide 20-25% deposit.

    I brought my home with a 5k deposit in 2005.

    Having just sold it through fear of an interest rate hike at some point and with nobody willing to re-mortgaging me, I can’t dream of being a home owner again until i’ve saved at least 30K.

    This article is nothing more than a sales pitch to the vulnerable.

  2. avatar Rob Slack says:

    Is £600 per month less than £732?

    If the buyer has paid a 20% deposit the £600 is to buy the remaining 80%…equivalent to £750 per month for the full 100%. The difference may be less than it seems…if the deposit were 30% then £600 would equate to £857.

    All that ignores the potential for capital gains/losses and rents rising/interest rates changing.

    Comparison of rental rates vs repayments is a bit simplistic…unless that is how people think!

  3. Yes exactly, I agree. These days getting a resident on rent seems to be more costlier than purchasing. So, due to decline market of letting, people prefer to buy a resident instead of getting on rent. And the letting agency market had declined in past few years.

  4. avatar NICE HOUSES FOR NICE FOLK says:

    I remember when 100% morgages were all the rage and they’d even lend you money to furnish the place too lol … Most people start saving and if they DO manage to get up to the 10k mark then the car needs replaced or something equally costly occurs and they’re back to the start! So 30k is a nigh impossibility!!!

  5. avatar Shaun Douglas says:

    As a couple of replies above have pointed out,unless you are planning on using a house a long-term investment, the high deposits required for what are still hefty repayment rates will deter most people from buying a property in the current climate.
    rent rises are also relative to your geography – most places in the east Midlands haven’t seen huge rises in the rent, whereas the rise from 5% to up to 30% for relatively decent rates is astronomical if one looks at the relatively short period of time that this escalation has occurred. Deposits and repayment rates do not reflect the income levels of most first-time and second-time buyers nor do they reflect the low base lending rate. Amazing that savings rates appear to reflect that BR though, eh?
    Buy only if you are looking for a long term investment or have spare cash. Otherwise, rents will allow you to reside in better areas than your mortgage could possibly stretch to.