Hero image
Paramount Properties

Buying vs Renting in London: Which is Best for You?

Main Image: © xavierarnau via canva.com

If you've been renting until now, you may find yourself struggling with a decision many others face. In this market, is it better to buy or rent?

On one hand, as you'll probably be aware, the mortgage market also panicked last year after the autumn mini-budget announcement, when the majority of mortgage products were pulled.

Thankfully, the market has settled again around a new equilibrium, and more mortgage products are available to borrowers. Skipton Building Society has even come out with the UK's first no-deposit-required 100% mortgage to launch in the UK since 2008.

Last week, the Bank of England increased the base rate for the 12th consecutive time since November 2021. This base rate affects how affordable it is to get a mortgage and buy a house, though it's worth noting lenders will have already anticipated recent rises. This means we're unlikely to see dramatic increases in mortgage rates off the back of this. 


On the other hand, the rental market in London is competitive. According to Rightmove, property views in North West post codes were up over 50% in March compared to last year.

At Paramount, on average, we've seen 75 keen enquiries per property since March. Our properties are available for just a week on average before getting snapped up, though some—especially our Gold Standard properties—are taken much quicker. 

When we look at market rents for new tenancies starting in March, they're 11% higher (again, on average) than last year.

So, all of these factors might be leaving you confused about your next move: Should you continue to rent, or is it time to get that first mortgage? 

Let's break it down with the pros and cons: 

Renting in London: Pros vs Cons

When it comes to the London market, there is a way to beat the competition and find a property that works for you without all the stress and disappointment.

The secret? Renting off-market.

How do you get in on this? If you register with us ahead of your property search, we can help match you with properties we know will be coming to market before they're available.

So what are the pros of renting? 

1. The ability to move around. Renting gives you much more choice and flexibility over your location. You can experience different types of living styles and change who you live with fairly quickly. If you prefer variety, change, and excitement, renting can work well for this.

2. Maintenance costs covered! If your boiler goes down, or you spot a leak, you can have these fixed at the touch of a button. There are no financial or mental responsibilities as there would be with owning. For someone living a busy lifestyle this can be a huge weight off!

3. Unlocking more locations. Often, you’ll be able to rent in an area that you wouldn’t be able to buy in, opening up locations that would otherwise be unattainable.

4. Lower initial costs. Moving in and getting set up are significantly less expensive than buying. You cannot save for a hefty deposit here—you need 5 weeks of rent for a security deposit, and you’re good to go. 

And the cons?

1. No capital gain. You aren’t investing in something that could improve your capital.

2. Lack of security. There is always the chance the owner will want to sell or move back in, so you may be faced with having to move on without it being your choice.

3. Restriction on individualism. Though we are seeing this rapidly changing, not being able to make a home ‘yours’ is a common complaint we see from residents.

4. Higher monthly payments. Rental payments are often more than what you would expect to pay on a mortgage.
 

Renting in London: Pros vs Cons

It's true that mortgage rates aren't what they were in 2021 when it was very cheap to borrow money (with rates below 4%), but they've come down since they spiked at the end of last year (Rightmove has a helpful article about current rates here). 

When it comes to timing, buying is such a significant life milestone and commitment that making sure it's the right time for you is more important than timing the market.

What are the pros?

1. Sense of security. If you've bought with a fixed-rate mortgage, you'll have a clear view of your monthly payments for that fixed term, which will be longer than a rental term. There's also no fear of losing a property to sale or at the discretion of another party.

2. Limit to monthly payments. Once the mortgage is paid, let's say over a 30-year period, you have no further outgoings in terms of rent/mortgage. Rental payments will continue to be due as long as you are in a tenancy.

3. Capital gains. Property is a fairly sound investment. Property prices increase over the long term, so you will very likely make more money than you put into the purchase. This leaves you with options for retirement, helping children and future generations, or just enjoying a better quality of life.

4. Make it your own. The ability to decorate and make a property your own is a huge plus for those wishing to put down permanent roots. Within planning restrictions, you can amend and alter to your heart's content!

And the cons?

1. Upfront costs are higher. The upfront costs of buying are higher. In addition to your downpayment, you'll also have to pay for things like searches* during the buying process, the stamp duty land tax, and solicitors fees, to name a few. Moving costs are also likely to be higher.

Of course, you may have the freedom to refurbish the property to your heart's content, but you will also have to pay for it!

2. You are tied to one location. This impacts other life decisions like the job opportunities you’re able to explore, schooling for children etc.

3. You are liable for all costs. Need a new roof? That’s on you, I’m afraid. Is your boiler not working on a holiday in Winter? You’ll have to make the call to pay for an expensive out-of-hours plumber or sit tight and wrap up warm! It becomes a different conversation when you’re paying for it!

4. It can be expensive to get out of. Buying a property, especially with someone else, is a big commitment and is likely to cost money to get out if things don’t go as planned. If you need to sell your property before you expect, it can be expensive if it's the wrong time in the market, and you could end up losing money. 

_________________________________________________________


In summary, whether it's better to buy or rent comes down to what's important to you in your life right now. Ask yourself these questions:

What are my long-term financial goals?

Am I ready to commit to one location?

Is the area I can afford a place I am happy to commit to long-term? Does it have the potential for growth?

How important are long-term stability vs flexibility?

If you'd like personal advice on your best options, call us today! We're here to help. 

We would love to hear from you. Click here to let us know what you think!