Demand for Rented Homes on the Up as Renting is Now Cheaper Than Buying

As mortgages are so difficult to get these days, the demand for rental properties has been increasing.

The latest housing data shows that renting is now cheaper than buying in over half of the UK’s 50 largest cities.

Property experts Zoopla found that in 54% of cases, the monthly cost of renting a two-bedroom home is less costly than obtaining a mortgage.

This is promising news for buy-to-let landlords, especially as this trend has risen in a relatively short space of time. In October last year, the number of these locations was just 40%.

House Price Rises

Due to house prices increasing, mortgage payments are increasing far higher than rents.

Image credit: Thomas’s Pics via Flickr

In the survey of Britain’s 50 biggest cities, Zoopla found the average monthly rent on a two-bedroom home is £690. Compared with mortgage repayments of £737 for the same size property, you’re making a saving of £564 each year.

Some property speculators have concluded that house prices have reached a high point, particularly in the capital and Home Counties. This is mainly due to a chronic undersupply of homes and numerous enquiries for the same property. Historically low-interest rates and help-to-buy schemes have also helped raise prices.

Regional Statistics

While London is a popular place to invest, you can great better yields in other parts of the UK, including Liverpool, Bristol and the commuter towns and cities.

Image credit: Berit Watkin via Flickr

Analysing the Zoopla data further, a correlation emerges between the most expensive areas and the biggest rent/mortgage difference. This is no more evident than in London, where monthly rents of £1,861 lie well below mortgage repayments of £3,000. However, due to the high property prices in London, the rental yield is actually much lower than in other areas of the country, which means that investing in property outside of London can prove better value for money.

Liverpool and Bristol are other areas of interest for buy-to-let investors, with differences between rent and mortgage repayments of 23% and 16% respectively. Because of this, Aspen Woolf have sourced properties from these locations due to the potential for high tenancy demand.

The table below displays the top ten:

LocationMedian Monthly RentAvg. Mortgage RepaymentDifference
London£1,861£3,00047%
Cambridge£1,099£1,48830%
Brighton£1,199£1,57627%
Reading£1,000£1,30126%
Bedford£764£97524%
Liverpool£623£78423%
Southampton£779£94920%
Bristol£900£1,05616%
Oldham£476£55014%
Bournemouth£848£97514%

Large Demand for Rented Homes

As mortgages are so difficult to get these days, the demand for rental properties has been increasing.

Image credit: Diana Parkhouse via Flickr

The scramble for rented properties has been high in the UK for many years now, especially as obtaining a mortgage has become increasingly difficult for first-time buyers. According to accountancy firm PwC, there will be 7.2 million households in rented accommodation by 2025.

Further research from the ARLA property group showed that in January this year, their letting agents witnessed a 34% increase in registered tenants per branch. This is good news for landlords as monthly rents will maintain a positive growth whilst remaining cheaper than mortgages, as noted above.

The rise in rents can be attributed to a lack of supply, with additional government pressure on landlords playing its part too. And as there’s no real sign of this pattern slowing down, it appears as if the buy-to-let sector is the place to invest at the present time.

 

If you’d like to know more about the current demand for rental properties in the UK, feel free to get in touch with us today. Our range of properties are carefully selected where the need for accommodation is at a premium, at a time when renting is cheaper than buying.

If you’d like to invest in London property but can’t, you may be interested in how Commuter Towns are the Hottest Places for Property Investment.