London buying cheaper than renting?

ViolaLass

Notmyrealname wrote: »

5%. The same as it was 30 years ago.

5% if your credit rating is squeaky clean and everything else lines up. Much more likely to need 10 or 15%.

GDB2222

1. You have probably underestimated some costs, such as maintenance on the flat, insurance, etc. Quite a lot of flats have a regular £100/mth service charge, then sting you every so often for a few thou when work needs doing.

2. I would not buy a one-bed flat. Two beds give you so much more flexibility if you start a family.

Kynthia

There's more responsibility and risk but as long as you know what they are and have a plan to deal with them it's fine.

I bought in 2006 and now my flat isn't worth what I paid. Also my life changed as I met someone who lived elsewhere and married him, but l bought a place that I could let if necessary. Can you cope if interest rates increase to 8% or if the roof needs fixing. What if you lose your job or want to travel. A property has tied up your money and it can be slow to sell whereas when you rent you have flexibility and more certainty on your costs. House prices aren't rapidly increasing so don't rush into a decision.

nollag2006

Buying has been substantially cheaper than renting for almost five years now.

With rents rising and interest rates falling - that gap will continue to widen.


http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/9143731/Buying-still-cheaper-than-renting.html

Despite buying in London being out of reach for many, it still beats renting with the average asking price for a 2-bedroom flat in the capital currently at £452,387, while the average rent for an equivalent property is £2,422 per month, making renting 29.6pc more expensive than owning on average. Renters in London could pay £6,687 more on average per year than home owners.

If you can afford to buy, and you see a house you like - do it now before the market moves away from you

Out,_Vile_Jelly

If you've got a hefty deposit and two salaries then it can be cheaper to buy, but don't be tempted by a 1 bed place just because you can afford it. Think about how easy it will be to sell/rent in a few years time when your circumstances may change.

Renting means you can live in a far nice area than owning; I can't afford to buy in Wimbledon but can rent a nice garden flat.

GDB2222

Despite buying in London being out of reach for many, it still beats renting with the average asking price for a 2-bedroom flat in the capital currently at £452,387, while the average rent for an equivalent property is £2,422 per month, making renting 29.6pc more expensive than owning on average. Renters in London could pay £6,687 more on average per year than home owners.

Their figures make no allowance for any costs of ownership other than mortgage interest. So, you need to add in insurance and maintenance. Things like replacing the carpets every few years. Also, the average rental property in London is more likely to be furnished than unfurnished, so that's another cost.

By the time you have allowed for all that, the difference in cost is halved at least, and it'll be wiped out by a 1% movement in house prices. Even on the ropey figures give, the difference is under 1.5% of the house value. So, buy if you think prices are going up, and don't buy if you think they are going down.

nollag2006

GDB2222 wrote: »

Their figures make no allowance for any costs of ownership other than mortgage interest. So, you need to add in insurance and maintenance. Things like replacing the carpets every few years. Also, the average rental property in London is more likely to be furnished than unfurnished, so that's another cost.

By the time you have allowed for all that, the difference in cost is halved at least, and it'll be wiped out by a 1% movement in house prices. Even on the ropey figures give, the difference is under 1.5% of the house value. So, buy if you think prices are going up, and don't buy if you think they are going down.

Equally, it doesnt make any allowance for rising rents - which have been ticking up well above inflation for many years now.


As for maintenance and insurance making up the difference - I think not. None of my properties have insurance of more than £200 per annum and maintenance costs are low.

Buy if you if you can, and you think that renting costs are likely to continue to exceed renting and if you want the security of not having a landlord who can chuck you out at two months notice.

Rising or falling house prices shouldn't be your main determinent - both house prices and rents in London have been rising steadily since the bottom of the crash in early 2009.

Taking Southwark borough house price figures from the Land registry as an example:


[IMG]http://www1.landregistry.gov.uk/Apps2/house-prices/house-price-index-custom-reports/hpi_report.asp?g=1&gt=1&a=Southwark&s=01 May 2009&e=01 May 2012&t=1[/IMG]

GDB2222

nollag2006 wrote: »

Equally, it doesnt make any allowance for rising rents - which have been ticking up well above inflation for many years now.


As for maintenance and insurance making up the difference - I think not. None of my properties have insurance of more than £200 per annum and maintenance costs are low.

Buy if you if you can, and you think that renting costs are likely to continue to exceed renting and if you want the security of not having a landlord who can chuck you out at two months notice.

Rising or falling house prices shouldn't be your main determinent - both house prices and rents in London have been rising steadily since the bottom of the crash in early 2009.

The survey was for a £450k property with a monthly rental of £2200. Is your portfolio catering for that market?

I don't really get your point about rising rents? Mortgage interest rates may rise too.

nollag2006

GDB2222 wrote: »

The survey was for a £450k property with a monthly rental of £2200. Is your portfolio catering for that market?

Nope - my flats are all in the region of £300 - 350k, with rental yields of 7-8%.

All would be far far cheaper to buy than to rent

GDB2222 wrote: »

I don't really get your point about rising rents? Mortgage interest rates may rise too.

It's quite simple

Mortgage rates are flat. They may even fall if the BOE decides to cut next month. Few people expect rates to move upwards over the next 2 - 3 years.

Rents have risen dramatically over the past few years in London, and these rises show no signs of abating.

It's quite simple really - if you can afford it, can obtain the mortgage, and find a place you really like - you would be mad not to buy.

adindas

ah6321 wrote: »

Hello all
We currently rent a 1 bed property in London and pay £1200 pcm.
My salary is £30k
My partners salary is £26.5k
We are both in our 20s and are fairly recent graduates.
Combined savings ~£50k
No kids and none on the way any time soon (I hope)
Would be first time buyer, although it's not really something we're looking into seriously atm.
According to sales prices on Zoopla, the one bed flat we are currently living in is worth ~£250k

So would therefore require mortgage of £200k

Anyway using a 5 year fixed from the post office for an example and a 30 year term, I put all of this into an amortisation spreadsheet.

The results are that the mortgage would cost £960 pcm and that after 4 years we will have paid off £15k

4 years of our £50k in the bank would make us less than £10k in interest and our monthly housing costs would be £240 cheaper. As it's a block of flats there's a service charge and other stuff which may come to ~£100 pcm max.

Considering your current renting cost and given that you can get a mortgage, which I believe you can it is a no brainier that buying will make you better. Many people do not buy a house just because they do not have sufficient deposit and.or can not get a mortgage. Your situation is different with these people.

You can not take the monthly installment for mortgage into consideration as you already own the house by paying that amount and this will become your equity.

Rough calculation. considering 4%APR for saving is already very good rate you will only make £2,000 a year from your £50,000, while you are paying rent of £14,400 a year.

Just make sure you take tine to find a good property to avoid being in negative equity in a few years to come.