Housing round up: Renting more costly than buying, prices predicted to be stable in 2012


Housing & mortgage round upIn this weeks housing round up we look at why buying is cheaper than renting, the outlook for property prices in 2012, and the fact that repossessions are on the rise.

Buying better than renting in majority of towns

According to research from property website Zoopla, buying a property is now more cost effective compared to renting. The survey showed that in 47 of 50 towns, buying a property is cheaper than renting, an increase of seven from last year’s survey.

With reduced mortgages approvals this year and first-time buyers finding it difficult to save sufficient deposits, the demand for rental property has increased which in turn has led to rising rents.

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Zoopla conducted their research by evaluating the asking prices and rents of 78,000 two bedroom flats, which are typical properties for first time buyers. Swansea, Plymouth and Bournemouth are the three locations, where renting worked out cheaper than buying.

In comparison Milton Keynes tops the list of towns where buying is cheaper than renting. Renting there is 36% more expensive than owning, leaving renters £2,436 per year worse off compared to homeowners.

The figures may encourage people to try and get on the housing ladder, however, Nicholas Leeming of Zoopla, said: “Although buying may be more cost-effective than ever compared to renting, many potential buyers aren’t able to take advantage because they can’t access mortgage finance”.

He continued: “The shortage of financing, especially to first-time buyers, has pushed demand for rental property through the roof. But for those lucky enough to be in a position to get a mortgage, there may never have been a better time to buy.”

Despite the average cost of a two-bedroom flat standing at £442,036, tenants in London will pay an average £6,888 more a year than home owners, with the average monthly rent at £2,416.

Locations where renting is better than buying:

Rank Location Average monthly rent Average asking price Rental discount
1 Swansea £653 £172,871 -9.3%
2 Plymouth £618 £158,693 -6.6%
3 Bournemouth £756 £192,456 -5.7%

Top 10 locations where buying is better than renting:

Rank Location Average monthly rent Average asking price Rental premium
1 Milton Keynes £756 £133,217 36%
2 Warrington £601 £108,604 33%
3 Walsall £507 £92,031 32%
4 Coventry £582 £105,850 32%
5 Northampton £587 £106,925 32%
6 York £866 £158,127 31%
7 London £2,416 £442,036 31%
8 Wolverhampton £505 £92,590 31%
9 Swindon £597 £110,574 30%
10 Birmingham £706 £130,937  29%

Property prices stable in 2012

The Halifax, the UK mortgage lender, has released their forecast for the UK housing market for 2012 and predicts little change in property prices.

The Halifax forecast, expects house prices to remain broadly stable, predicting property values falling or rising, by no more than 2% next year.
The data from also showed that the average house price is £161,731, which is down by 0.7% this year.

Property experts believe that the housing market is suffering from weak demand due to job insecurity, unemployment, concerns over the state of the economy, tight mortgage lending criteria and home owners unwilling to sell for less than they believe their house is worth. These factors seem to be behind the Halifax’s predictions for 2012, which, if they come true, will see the housing market have no definite direction in 2012.

The Halifax expressed further concerns over possible difficulties for accessing mortgage finance and that unemployment will increase during 2012. However, the Bank of England is expected to maintain base rate at 0.5% for the whole of 2012, which will help households afford repayments and encourage first time buyers.

Housing economist, Martin Ellis, of the Halifax said: “Overall, we expect continuing broad stability in house prices nationally during 2012. Prices are again likely to end the year at levels close to where they begin with the market continuing to lack any real direction. The prospect of an exceptionally low Bank of England base rate over the foreseeable future is likely to continue to support the market over the coming 12 months.”

Increase in repossessions

According to the latest mortgage lending statistics from the Financial Services Authority (FSA), the financial regulator, the number of repossessions rose in the third quarter from 9,134 in 2010 to 9,670 in 2011 an increase of 5.8%. New repossessions also rose by 2% between the second and third quarters of 2011.

The FSA also reported that the total value of outstanding loans at the end of the third quarter was £1.2 trillion, up 0.2% on the previous quarter.

With household finances under continued pressure, and unemployment on the rise, the Council of Mortgage Lenders (CML), the trade association for the residential mortgage lending industry, have suggested that repossessions will go up to 45,000, an increase of 8,000 from 2011.