Is renting really more expensive than buying?

LittleMissAspie

IronWolf wrote: »

Another cost of owning a house which is being ignored is the opportunity cost, of buying at the wrong time and missing potential profits from buying in a stagnating market.

I hate it when people talk about the opportunity cost of buying. You have to live somewhere, if you don't spend your money on buying then you have to spend it on renting. You have to pay for somewhere to live either way. Why don't people ever talk about the opportunity cost of buying food or utilities? A roof is just as essential. Maybe I should work out the opportunity cost of the Ambrosia custard I bought yesterday, compared to buying Tesco value custard and compounded over the rest of my life...

N1AK

Hank_Rearden wrote: »

Cottage "in the country" - £650/month. On market for £300k. At 4% that's £1000 on an interest-only mortgage.
3 Bedroom house in NE London - £1500/month. On market for £600k. At 4% that's £2000 on an interest-only mortgage.
2 Bedroom flat in W London - £1350/month. Very similar flat on market for £450k. At 4% that's £1500 on an interest-only mortgage.

Assuming those are achievable selling prices then you've been renting at a low rate. Generally you will find that landlords will be charging much closer to the IO figure in most markets.

Hank_Rearden

N1AK wrote: »

Assuming those are achievable selling prices then you've been renting at a low rate. Generally you will find that landlords will be charging much closer to the IO figure in most markets.

Good observation re achievable - both London figures certainly; the cottage one not so sure, the market is a little less liquid there.

I suspect that - like everyone - I've had my perspective skewed by personal experience - London seems to be relatively cheaper to rent than buy compared with elsewhere; and in the West Country the v high ratio of house prices to salaries (c13-1 in my neck of the woods) keeps rents low. It's one of the reasons that there's little rental property, because the yields are low.

silvercar

It's one of the reasons that there's little rental property, because the yields are low.

That's another thing to consider. Round my way there are some 2 bed flats and 2 bed flats to rent. Anything bigger is very difficult to find. So its not just a question of comparing the cost of renting vs. owning but the chance of being able to find a suitable property available at the right time.

chucknorris

LittleMissAspie wrote: »

I hate it when people talk about the opportunity cost of buying. You have to live somewhere, if you don't spend your money on buying then you have to spend it on renting. You have to pay for somewhere to live either way. Why don't people ever talk about the opportunity cost of buying food or utilities? A roof is just as essential. Maybe I should work out the opportunity cost of the Ambrosia custard I bought yesterday, compared to buying Tesco value custard and compounded over the rest of my life...

They are talking about the opportunity cost of the extra capital cost of buying ie the deposit, stamp duty and fees etc. As you say you can't do without food, and with housing either the rent or mortgage has to be paid. However if you rent you have that capital cost to do other things with, that's what they are talking about.