With steep house prices and numerous associated buying costs, is there any merit in renting a property instead?
Landlord and tenant website Bunk has assessed the expense of buying and renting a home over a 10-year period in the UK to compare the costs across different towns and cities.
Rental costs
Average monthly rent in the UK currently stands at £676, with a deposit now capped at five-weeks worth of rent, ie. £845. Over 10 years this amounts to £81,120, or £81,965 including the deposit.
The cost of buying
The average cost of buying a home in the UK is £226,798, meaning a 10 percent deposit would be £22,680. Borrowing the remaining £204,118 at a 10-year fixed-rate of 2.58 percent would mean a total repayment of £231,798, or £254,478 including the deposit.
Renting versus buying
This means that renting a home costs £172,513 less over 10 years, although of course ultimately a buyer will own their property.
Regional variations
Towns and cities where property prices are high offer the biggest saving to renters. In Cambridge, it costs a massive £341,090 more to buy than to rent, while in London the figure is £316,247.
Bournemouth costs £183,376 more to buy than rent followed by Bristol at £177,613. The capitals of Scotland and Wales come next, with Edinburgh at £166,547 and Cardiff at £143,984.
Three southern port cities follow with Southampton at £138,617, Portsmouth at £137,240 and Plymouth at £128,480. Glasgow has the lowest difference, with buying just £43,145 more expensive than renting.
Co-founder of Bunk, Tom Woolard, said “Of course the big difference between renting and buying is that one leaves you with a sizable financial asset as a reward for your years of hard work making mortgage payments.
“However, more and more of us are opting to rent long-term and what we wanted to highlight is that while the rental market is generally viewed in a negative light due to high rental costs, it is actually a considerably cheaper option when compared to homeownership, even with almost record low-interest rates.
“Not only this but those that feel resigned to renting due to the high financial barrier of buying actually have a much better opportunity to save compared to those paying a mortgage. Whether they choose to use this for a deposit further down the road or simply to enjoy a better quality of life is up to them.”
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