Homeownership is declining in the UK. Even as more consumers pursue homeownership, the number of households renting has risen dramatically. According to estimates from Zoopla, demand for rented homes increased by 33 percent in August compared to a year ago. However, it is not just the demand for rental properties that have skyrocketed; so has the average rent. The latest HomeLet Rental index showed that the average UK rental price for a new tenancy was £1,029- a 2.2 percent jump. When it comes to making the decision whether to rent or buy a home, it comes down to much more than affordability. The flexibility of homeownership, the uncertainty of being able to make a rented house a home, and the lower bills that come with both are just a handful of the factors you need to think about before signing that lease or mortgage application.
Renting Can Be Cheaper In The Short Term
Contrary to popular belief, renting can be a cheaper alternative- in the short term. Most rented properties require a deposit equivalent to at least 1 month’s rent. However, there are significantly higher upfront costs of buying a home including closing costs, mortgage valuation fees, conveyancing fees, and survey costs. This can easily add up to thousands of pounds before you can even move in. For instance, The Homeowners Alliance estimates that conveyancing fees can average from £850 to £1500 alone.
The Argument For Flexibility While Renting Remains
Another argument for renting is the increased flexibility it can provide. Renters have more freedom when it comes to the length of stay since they can sign tenancy agreements for 6 months or 1 year. However, securing a mortgage is often a long-term commitment. It is also arguably easier to break your rental contract if you decide to move cities or move abroad. However, as a homeowner, you would need to go through the process of listing your home for sale.
Homeowners Not Renters Enjoy Lower Bills
Surprisingly, a recent report by Halifax has found that homeowners are £800 better off than renters every year. The study also showed that the gap in costs between renting and owning a home continues to grow. It is now 8 percent fuelled by lower mortgage rates and rising rental costs. The disparity also varies according to the region – something to be kept in mind during the rent vs buy decision. In London, the annual difference between owning and renting is £4,608 (or £384 lower when owning). Meanwhile, in the South East, there is a £2,580 (or £215 monthly) difference between owning and renting. Halifax also found that renters pay £68 more than homeowners every month. The reason behind the widening gap? The cost of renting has risen by 10 percent in the last year while the cost of homeownership jumped just 1 percent.
You Could Capitalise On The Housing Market Boom By Investing Now
One of the biggest arguments for buying and not renting a home is the investment you will be making. The housing market continues to grow rapidly and with housing prices rising, you can enjoy a tidy profit if you plan to sell your home in a few years. Real estate investments continue to be one of the most stable investment choices. At the same time, your monthly mortgage payments take you one step further towards owning the property outright instead of paying for occupancy.
Finally, being a homeowner means you get greater autonomy. Homeowners control the design of their homes, their timelines, and the kind of home improvements they want to make. On the other hand, when renting most changes need to be approved by your landlord or letting agency. Additionally, most renters are required to restore the property to its original state at the end of their tenancy- at a cost to themselves.
So is renting or buying the right choice for you? The decision will depend on your budget, your preferences, and your long-term goals. Before you do decide, take the time to weigh all the pros and cons of both.