Renting a property has now become cheaper than buying one for the first time in over six years.
In a new research report from London estate agents, Hamptons, it was found that a typical first-time buyer will now find it more affordable to rent a property as opposed to buying one on a month-to-month basis.
This revelation is somewhat surprising considering the rental growth of recent times. Despite the global pandemic, rents in Great Britain have seen a 7.1% rise over the last 12 months. However, alongside this rental growth we’ve experienced a year of immense house growth throughout the UK as well – with said growth reaching the highest rate in over 15 years last month. In the 12 months leading to May of this year, house prices have increased by a massive 13.4%, the highest year-on-year growth since December 2004, outpacing the rental growth in the country and resulting in buying a property now costing more than renting.
This is a stark comparison to pre-lockdown times. In March 2020, a first-time buyer with a 10% deposit would have been £102 better off each month by buying a property as opposed to renting, but, in the unprecedented 14 months that have followed, the trend has been well and truly turned on its head. Now, a typical renter will be £71, or 7%, better off than a first-time buyer with a 10% deposit. The statement rings true in 7 of the UK’s 11 regions, a massive difference compared to early 2020 when it was cheaper to purchase a property in every single region in the country.
Aneisha Beveridge, head of research at Hamptons, had this to say on the report’s findings: “A year ago, lenders were either increasing their rates or withdrawing higher loan-to-value mortgages altogether. For first-time buyers in particular this pushed up the cost of paying a mortgage, if they could get one at all, to well above the cost of renting.”
“And while interest rates are falling, they’re still considerably above where they were pre-pandemic on higher LTV (loan-to-value) loans. Despite this, we expect the gap between renting and buying to close over the remainder of this year, moving back towards longer-term levels in 2022.”
Attitudes towards renting a home have been changing for a number of years now as more and more people reject the social expectation of homeownership in favour of the lifestyle renting offers. Renters have a flexibility that buying simply can’t match. The shorter commitment of a rental contract means that renters can experience different areas, cities, apartment types and price points for shorter periods of time to help find a way of living that’s perfect for them.
Those who rent also benefit from things such as the peace of mind that any maintenance issues fall under the landlord’s jurisdiction, meaning any broken boilers, clogged gutters, cracked windows or leaky pipes will all be sorted and paid for by your landlord. This offers a massive weight off your shoulders knowing that a costly repair or maintenance bill will come your way, out of the blue.
These, along with countless other benefits, have resulted in a drastic increase of people living in rental properties in recent times. It is now estimated that households occupied by private renters make up over one fifth of total households in the UK, standing at an estimated 4.44 million in 2020.
The massive cultural shift has seen the government introduce a plethora of schemes and incentives for homebuyers in the hope of encouraging first-time buyers in particular to take their first step onto the property ladder. Whilst definitely giving the housing market a much-needed boost during the pandemic, these schemes have now somewhat backfired and resulted in a huge uptick in UK property prices, which makes it extremely difficult to get onto the property ladder – leaving renting as the more affordable option.
This massive financial revelation that renting is now cheaper than buying further solidifies renting as an acceptable lifestyle choice as opposed to a stepping stone to homeownership. It’s time to stop writing it off as a young person’s game and embrace the benefits that renting offers for all!
If you’re interested in renting a property, look no further! We have rental properties of every kind available throughout the country. Get in touch with us today to discuss further.
