Quite a nice article to debunk some myths about renting vs. owning, with arguments for both sides. Thought this might interest some people here!
There is a whole lot of truth in this. And coming from a country where renting is much more common than over here, I agree with pretty much everything the author says.
There are, however, a couple of things which make renting particularly unpleasant in this country:
- The UK renting market is very renter unfriendly: As standard you get one year fixed terms, during which you can basically do nothing about your home. You can barely paint it, and every nail you put in the wall to put up a picture will cost you dearly! I know people who have been kicked out of their homes every year or two, just because the landlord wanted them out. That’s not something that’s pleasant for singles, but for families it’s an almighty pain. In other countries, renting a home gives you very similar rights to owning one, and the landlord pretty much can’t kick you out unless you are seriously in rent arrears, which makes renting much more attractive.
- In the UK (at least in the south east) the cost of renting is (at least in my experience) much much higher than the cost of ownership. I pay virtually the same in mortgage for my house, as I did in rent for my flat. The difference: The house is more than twice the size, and in a nicer area.
It has certainly changed for the worse in this country. Many decades ago I had the opposite experience to you. I rented a two bedroom flat in a fairly expensive area of London. I then bought a one bedroom flat in a relatively cheap area. I paid quite a bit more for the mortgage than I did for the rent.
Rent controls often do harm though - it is almost impossible to find an apartment to rent in the rent controlled areas of New York because people refuse to give them up even when they move out of the area. One of my colleagues keeps his apartment there even though he stopped living there in 2004 - the rent is a pittance and he likes to go back to visit. He says it is common to do what he does. If there were no controls, people would bid up the rents on desirable areas such that the utility is maximised.
The other anecdote I have is my son - he rents from a colleague in Amsterdam where renters gain huge protection after a couple of years - so much protection that the mortgage company insist the colleague stops renting the apartment out before the protection kicks in so my son will be kicked out in a year or so.
In London, investment landlords often don’t rent the expensive apartments out because the rent is so low vs the massively inflated prices paid for the flats. You can rent amazing places at an equivalent yield of 1% or so - if you can find them.
I’m not at all in favour of rent controls. As you said: they often do more harm than good.
However, it’s those short ASTs that are so common here, that really make renting a painful experience. In Germany you usually have rolling contracts with notice periods of 3-9 months. The landlord can only give notice if he has a “justified interest” in the home (basically serious breach of contract, or the landlord needing the property for their own use). German renting law is significantly skewed towards the tenant. Which can suck for the landlord, but makes renting an altogether different proposition.
Additionally, because people generally rent the same place for many years, you usually decorate the place when you move in, thus being able to “make it your own”.
I know people who have rented the same place for basically all their life. Have redecorated it multiple times in between, and really treat it as their home. That doesn’t happen in this country.
I really really enjoy this article. It’s brilliantly written and has food for thought. I only started saving for a deposit last year and starting to look at house prices in my area is daunting.
I’ve been thinking about moving to areas where buying is beneficial over renting. I’ve moved out twice renting and ended up back at home, this is a main reason I would like to buy.
In particular I like these points. Especially the p/r ratio and will look at that when I’m crunching numbers.
Any idea how we can get the price-to-rent ratios for UK areas?
I’m trying to Google this but would also like to know. Everything is coming up as buy to let and best areas.
This is really interesting, even from a layman’s perspective/ clueless non-homeowner. At the moment I don’t have a choice since I move every year but I dislike not being able to decorate the place a bit more. I think buying a place requires serious thought (and money!) which I’m not prepared to do at this point- there’s nothing tying me down to one place or country and I’m not sure if I can like the same place for 10, 20, 30 years.
I think the article is technically correct for most parts of the country … and then there’s London.
London where you can expect the following:
Your rent to increase in line with your 6 month AST. Yes, if you’re unlucky enough that’s a twice annual increase
A pitiful amount of rights as a renter. There’s absolutely no sense that you can make the place you rent your home; god forbid you ever try to own a pet. And of course there’s no incentive to make home improvements or to take care of the mismatched charity shop furniture your place has been furnished with.
Your tenancy can end at any time should the landlord give you notice to quit. This is probably the thing I hate most about renting; I’ve moved 10 times in 10 years.
Good luck getting your deposit back. I have had landlords attempt to claim on the deposit for pre-existing issues and have been pretty much powerless to stop it.
Your rent will be disproportionately higher than the associated mortgage costs, but the mortgage costs are deemed unaffordable in relation to your earnings. The fact that you pay this amount month in, month out on rent is irrelevant.
Repairs, when done, are often of a lower quality than would be done in the home. This again cheapens the experience of renting and makes you feel like a second class citizen.
The power difference in the landlord/renter relationship in London (caused by demand far outstripping availability) means you a) don’t want to make your landlords life difficult by asking for required repairs in case they retaliate by rental increases. This definitely leads to resentment and can make you treat your place like somewhere you rent rather than somewhere you live.
Never calculated in these articles is the value of community and investment in your local area that you get through home ownership. I live in London and I don’t know my neighbours. To be honest, there’s no point trying; I know they or I will be forced to move on in a short period of time. This revolving door of change is hugely destructive on a social level, both in terms of our ability to form lasting relationships with neighbors/ in our community and in terms of investment in the area we live in.
At the moment I’m really lucky and rent from a friend. My rent is low, hasn’t increased in a few years and I can decorate as I please. The difference is night and day, and I have a real fear of the day I have to go back to the rental market.
there’s nothing tying me down to one place or country and I’m not sure if I can like the same place for 10, 20, 30 years.
Same for me, I don’t ever see myself living in the same place for more than a year or two. I also don’t like the liability of owning a property - I prefer freedom where I can just give notice to my landlord and move on.
As a single, that’s great. With family - not so much, because it goes both ways…
But ultimately that is, of course, exactly the author’s point: for some people buying might be better, for others renting…
Mmm yeah forgot that part. It’s true. My attitude to renting really started to change as I got older, and realised there was constant flux, which is not what you want anymore. It’s no longer exciting just a palaver.
Which was always my view. But now I’m getting older and the thought of paying rent out of pension vs mortgage paid off so no housing costs? No contest
I moved 8 times in 5 years, and the scars still show as it was mentally traumatising. I so long for the days when I wasn’t renting and lived at an address for a decade rather than months. Getting off the property ladder in this country was the worst mistake I ever made. Should have rented my London property out instead of selling it!
It’s not the ratio, but this BBC calculator is interesting:
Where I live is unaffordable for me! Yayyy
I use to think exactly like that but then 2 years ago I held my daughter for the first time and my whole world changed.
We moved house when she was born from 1 bed flat to 2 bed flat. We are paying £1550/mo + All the usual bills. I could be paying less than this for a mortgage but I don’t see my self getting out of this circle I am in.
Renting is great as long as you are fairly independent but as soon as you start a family you realise moving home means so much more. It means breaking all links to the area you are in.
I know my rent will probably go up again and I will have to move which means finding new playgroups, child care, playgrounds, thought of schools and so much more. This is all before I can think of our work commutes etc…
If you can afford to pay rent you can afford a mortgage. It’s the pathetically unjustifiable costs of houses, fees, deposits and all that other crap that people can’t afford.
I was looking through some papers from 2011 and flats in my area were circra £500 and now they are circa £950+ for the same ones, nothing has changed and the area is still the same just greed sets in once new builds go up.
Also the fact you can only borrow 4.5 times your salary or whatever it is. Doesn’t help if your on 20k but homes in your area have gone from 45k to 150k in 15 years