Renting Vs. Buying In The Uk-00-5486

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Too many people and too little land are underlying causes of the housing shortage that has characterised modern Britain for too many decades, driving up property prices beyond the reach of many ordinary people. Fortunately, there is another solution to getting that all-important roof over your head, namely a choice of property to rent.

Advantages of Renting

Nowadays, we have a culture in the UK which actively encourages buying your home rather than renting, but this was not always so. In 1953, UK home ownership was only 32%, which means the vast majority had to find a property to rent. By the year 2000 though, home ownership more than doubled to 70%, although this figure has steadily fallen since 2005. This reversal has been driven by recent dramatic falls in house values and an extreme shortage of mortgage money due to the banking crisis, driving people back towards the following advantages of renting:

• Monthly rent is generally cheaper than equivalent property ownership because you are not responsible for maintenance and repairs
• Without those maintenance costs and the variability of ...
... mortgage rates, your monthly bills will be more consistent, making financial budgeting easier
• The rental deposit is relatively small compared to purchase and is returnable
• There are usually no legal fees to pay for
• You can move out at short notice, e.g. for a new job or better flat

Disadvantages of Renting

With the building of millions of council houses, there was a fair supply of affordable houses to rent, but Thatcher’s Conservative Government in the 1980s gave Council tenants the right to buy, resulting in over two million rental homes disappearing in a short period. Combined with a sudden slowdown in replacement Council housing, this left the rental market heavily dependent on private rentals, which are more expensive than Council rents.

Other rental disadvantages include:

• Landlords can often tell you to move out at short notice without giving a reason
• Rents can be increased at short notice
• You are limited in what you can do to change the look or quality of your home
• In spite of a legal requirement to do so, landlords sometimes fail to undertake repairs
• You have zero capital growth on your home

Advantages of Buying

As it involves finding a hefty deposit and forking out for an expensive mortgage over many years, there must be some very good reasons for so many people trying to buy their own home:

• Over time, property prices have risen faster than inflation, making home ownership a good long-term investment
• Provided the mortgage gets paid off, there’s the potential of living rent free in retirement, unlike having property to rent
• You can improve your home without asking permission from a landlord
• Capital acquisition provides security and the chance to pass on wealth
• You can’t be moved at short notice

Disadvantages of Buying

Home ownership (or at least a mortgage) is not always the best option compared to choosing houses to rent:

• The property market undergoes cycles of boom and bust, which can leave buyers with negative equity, i.e. their house is worth less than they paid for it
• People overstretch their finances to get on the property ladder (or snake!)
• Homes can sometimes be difficult to sell
• Mortgage interest rates can vary wildly, especially over a 25-year period
• Unemployment can mean you will lose your home and your capital investment if it gets sold cheaply at auction

Whether you choose to buy or rent is often decided by your individual financial situation, which varies from city to city, and family to family.

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