Should I buy or rent?

Mike Cole

I’m often asked if it’s more cost-effective to rent or buy. The answer is more complex than you might imagine as you have to factor in many differentials. Even if you narrow it down to a purely financial decision, there is still much to get your head around; length of mortgage, house price rises, inflation, interest rates and so on… 

The conclusion is often that there is not a huge amount in it and where there are larger differences’ it’s often based on the location of the properties. Areas that experience higher house price growth tend to be better for buying. And vice versa.

What is indisputable is it is certainly more expensive to rent now than it was 7 or 8 years ago. High demand for renting as the housing market has slowed, has meant prices have increased, outstripping inflation and wage inflation specifically.

In Watford, the average rent of a two-bedroom property has increased by 38% between 2011 and 2018 – figures putting it at £1,175. At the same time, wages have risen by 11%.

In Hertsmere, it’s 37% rent increases to £1,200 average and 10% rises in wage inflation.

We struggled to access the Hemel Hempstead stats but it’s reasonable to assume a similar picture would apply.

That’s before we get to 2019 when there is most definitely a further increase in rents occurring, particularly off the back of the tenant fees ban. The ban stopped tenants having to find roughly £350 to get into a rental property and, instead, passed that on to the landlord. The landlord upped the rents by £30 a month to return the status quo. The ban basically gave tenants a year to pay the cost of taking a rental, which I guess suits them and not too much harm done. 

On the face of it, tenants have had a raw deal on this basis but it’s also true to say costs and tax for landlords have shot up over the same period. If landlords were gaining a 37% benefit, that would be something unsavoury, but tax and inflation alone will have wiped out that amount. That’s before the extra costs and litigation required to be a landlord now have been added. It’s one of the reasons we manage so many more properties for clients. They just don’t want the headache and risks associated with letting but do want to get a quality set up taking care of their valuable assets.

If you are a landlord and want to know your property is in experts hands, please contact me for a discussion on your options.