Renting an investment property is now cheaper than buying in 27 out of 50 UK cities, according to new research from property website Zoopla.
Data collected by Zoopla found that of the 50 key UK cities surveyed in their latest survey, 27 are more affordable for tenants to rent rather than buy. Zoopla tracks the cost of renting a two-bedroom home in comparison to the cost of servicing a mortgage on an equivalent property in the same area. The researched is based upon the cost of a median-priced home bought with a 90 per cent mortgage with a 25-year term.
In many cities in the UK, the difference in affordability was significant. For example, it was almost a third cheaper to rent in Cambridge, whilst in London it was nearly half. In comparison, in the cities within which renting was more expensive than buying there was often no great difference between the two. There were, in fact, just four cities in the UK in which the difference amounted to more than a fifth.
The changing dynamic of the housing market has been attributed to a prolonged period of low interest rates. This made mortgages more affordable. This, coupled with government initiatives aimed at helping home buyers, improved buyer demand in the market, leading to increased house prices across Britain.
However, the current situation may not be sustainable, due to the growing pressure instigated by the government on private landlords. Tax and regulatory changes introduced by the government have eaten in to landlords’ income, all the while increasing the risk on their investment. Should a large number of landlords opt to sell up because of this, purchase prices could begin to decline. This would in turn place upward pressure on rental prices, and turn the current market situation on its head.