When it comes to property, we have two choices – to rent or to buy. While the idea of owning your own home sounds luxurious and the smart choice, would renting work out better?
To make it easier for you, we have listed out the pros and cons of both buying and renting a property. We’ve also added some valuable information about buying and renting flats in the UK. In any case, make sure you get in touch with the best estate agent London can offer.
Table of Contents
The pros of buying a house
• Besides the pride of having your own property, a property owner has stronger and deeper ties with the community they live in.
• If you are looking for privacy, there is nothing like owning your own home.
• Housing is an early cycle sector. So in an early cycle environment, interest rates are low, incomes start to grow, and buying is feasible. Homes generally increase in value, and buying one ensures that you have an egg for after retirement.
• A fixed mortgage ensure that costs do not fluctuate, unlike renting a property.
• Want to save on tax? The property tax and interest of mortgage payments are tax-deductible.
The disadvantages of buying
• Becoming a homeowner is a long-term financial commitment. If you aren’t entirely financially secure, such a status can take a toll on your finances.
• As a homeowner, you will be responsible for all the maintenance, repairs, and upkeep of the property. You will also create strong ties with the community, making it difficult to leave if you need to.
• Expenses, when you buy a home, include a down payment, moving expenses, and closing costs.
• If you expect to see the value of your house increasing overnight – you might be disappointed that you would need to wait for a couple of years before that happens.
The advantages of renting
• As a tenant, your overall finances are much less. You can save more since the rent would cover utility charges.
• Renting offers flexibility.
• The landlord is responsible for the maintenance, repair, and upkeep of the property.
The disadvantages of renting
If you are looking at renting, tax benefits are out of the question. When you file your returns, deductions for mortgage interest and property taxes cannot be claimed. There is a chance that your tax could grow through the years.
Owning property or renting property in the UK
A study in 2018 revealed that renting anywhere in the UK was more expensive. Here are some findings from the survey:
To buy property, you would require an average of 51,000 pounds as a deposit. As a first-time buyer, you could save around 2,268 pounds per year when moving from a rented to an owned property.
While renting is thought to be cheaper than buying, the situation in London is quite clear – you can maintain a better financial position when you take a mortgage. Repaying a mortgage is more economical than the amount spent on rent in most places – not just in London, but across the UK.
Some local authorities in the UK where buying is less expensive than renting are:
• North Ayrshire
• East Ayrshire
• Burnley district
• North Lanarkshire
• West Dunbartonshire
In some areas of the UK, renters pay a premium when compared to homeowners servicing a mortgage.
If you are interested in renting, it is necessary to keep an eye on areas such as St. Albans, which is one of the top locations in the country. Here, renting is almost a quarter cheaper than owning a house and servicing a mortgage.
Owning vs buying in London
In London, where house prices are pretty high, the most expensive boroughs have been flagged as areas that are cheaper to rent. Kensington and Chelsea top this list with a 39.4% difference between renting and buying.
As mentioned earlier, St. Albans, which is situated just outside of London, is again an excellent place to rent rather than to buy. Islington is one of London’s boroughs that is cheaper to rent, with an 11.5% difference favouring renting.
Brexit has not made it easy to make decisions regarding renting and buying. The uncertainty of Brexit has impacted the housing market. For example, the Islington borough has witnessed a 6.9% fall in the average price of a house. But this does not mean that the tide will always favour one side or another. Rather, it would be wise to look at where savings and expenses lie.
Still wondering if you should buy or rent? Consider these factors:
• Buying is not the best for everyone.
• To buy, you must have a stable income or an income that grows.
• While buying a house is costly, the financial benefits become clear in the long run.
• Owning a house is a big responsibility.
So at the end of the day, there are advantages to both. What you must do will depend on three factors – where you want to buy, when you want to buy, and how you are placed financially.
If you are looking to rent or purchase a home in the city, speak to our estate agent London today. We can help you find a home in the heart of London. Contact our Soho office on 020 7734 4062, fill in the form below or pop in to our office on Broadwick Street and we can point you in the right direction.