Renting cheaper than buying in some cases in the UK property market

Created: 12 Jan 2023

Renting UK property may currently be a more affordable and flexible option than buying, particularly in the short-term. Factors such as interest rates, inflation and mortgage rates make it more difficult for some to enter the market currently, with many opting to rent and accumulate savings for long term housing investments later in the economic cycle.

The market for buying property is expected to improve in 2023 based on a recent survey conducted by Savills which found that a net balance of +3 per cent of respondents were more committed to moving in the next three months, and +12 per cent in the next six. Of those looking to move, 41 per cent were downsizing, 36 per cent were upsizing, and 23 per cent were moving due to a change in employment or a relationship breakdown.

This trend is expected to continue, with levels of commitment to moving among those looking to right-size their homes increasing significantly over the next year or two.

However, first-time buyers and buy-to-let investors, who are more dependent on borrowing, may find it more difficult to transact until affordability improves or until there is more certainty in the lending market. Savills found that 93 per cent of agents agreed that home life is now more important than ever, leading to a longer-term view when searching for the perfect home. Fewer than 10 per cent of buyers anticipate owning their next home for less than five years, while 60 per cent expect to stay for at least 10 years.

With these trends in mind, renting may now be a cheaper option than buying. While buying a home may seem like a long-term investment, the expected falls in house prices and the uncertain lending market may make it difficult for some to enter the market. Renting, on the other hand, may offer more flexibility and be a more affordable option in the short-term.

“Research by the BPF shows the number of BTR units in the UK will rise from 76,800 to over 380,000 in the next ten years, with the majority being outside the major cities. Furthermore, the English Housing Survey 2022 states that the number of households renting privately has increased by 93% in the last 15 years, while the number of owner-occupied households has grown by just 3%: the increased number renting is not solely linked to mortgage rates or the economy, but is part of a longer- term trend which also responds to the preference among younger generations for a more flexible approach to homeownership.”

https://www.propertywire.com/news/addressing-the-undersupply-of-homes-to-rent/

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