Renting can be great for a while. It gives you the flexibility to up sticks, pack your bags and leave within a short space of time, as and when you need. Plus, it’s easier to manage your outgoings, since you don’t have to worry about spending money maintaining the property. Kate Faulkner weighs up the pros and cons:
The main problem with renting is that it’s just not your property, and owning our own home is still the way that most people in the UK would prefer to live.
When you own your own home, there is a real sense of security, which is almost impossible to feel when you rent – even if most of the property is actually owned by the mortgage company!
And, for many of us, it is a natural instinct to want to ‘nest’ – making the home our own, whether we like a modern, minimalist style or a character, period one.
However, to buy a home in today’s market means saving and that’s tough to do, especially in London, where you are also likely to have to pay up to £3,000 every year in travel costs. Of course, renting doesn’t cost a fortune for everyone, because, like property prices, they vary across the country.
According to various reports, renting a property in its entirety costs around £500 to £600 a month in regions such as Scotland and Wales, the north, Yorkshire and the Midlands. In the south and East Anglia, average monthly rents range from £600 to £800 and in London, from £1,000 to over £2,000.
From an affordability perspective, renting can often be better than buying, as whereas prices increased faster than wages in most areas over the last 10 years, rents haven’t increased, on average, by as much.
The Office of National Statistics Private Rental Index shows that, from the eight years between May 2005 and 2013, private rents in England rose by 8.4%, with London increasing most during this time – by 11%, and the East Midlands rising by just 5.3%.
During the same period in England, according to the Land Registry, average house prices rose slightly more – by 9.5%, while in Greater London, prices increased on average by a staggering 60%.
These figures are shown in the affordability index table, created by HomeLet insurance company. For rent to be considered affordable, incomes need to be three or more times the monthly rent. The only two places where this isn’t currently the case are London and the south west.
One of the first things to do, therefore, if you are renting and want to buy, is to check whether you are renting your current property for more than the average price for the area you live in. If you’re finding it difficult to save, this may be a contributory factor.
But, before you can even contemplate buying, your preliminary tasks should be to work out:
1.Where and what you can buy
2.How much it will cost to purchase
3.What the running costs are likely to be, compared to renting
Where and what you can afford
One thing you may need to accept during this process, however, with the change from renting to buying a property, is that you may not be able to afford to buy as good a property in as nice an area, compared to what and where you are currently renting.
The best way to start searching for a property to buy is not to look at what’s for sale just yet, but instead to do a bit of research into properties that have sold recently.
Sometimes, in ‘hot’ markets, we find that properties sell for more than the asking price, whereas in markets where there are more sellers than buyers, purchasers may be paying 10% less. So, finding out what properties have actually sold for recently is a much better way to start researching the area and the type of property that you can afford.
The costs of buying a property will include:
• A minimum deposit of 5% of the property’s price
• Costs for legals, surveys and mortgage fees (normally around 1-2% of the asking price)
• Stamp duty, which is zero below £125,000;
• 1% for £125,001 to £250,000 and 3% above this amount up to £500,000
You will also need to calculate the running and maintenance costs that you’ll incur once you have moved in. These include any service and ground rent charges – if it is an apartment, and essentials such as buildings insurance and fixing or replacing the heating if it goes wrong. Maintenance costs will depend on the age of the property, but over time tend to average between £500 to £1,000 a year.
So, how could you save £5,000 to £10,000 to buy a home?
The first thing to do, is not to worry about trying to save this amount of money in a short space of time. According to Halifax, many first time buyers would give up saving if they couldn’t put enough money aside within three years. Much is dependent on where you live, and you may be lucky in that it may take you less time to save.
On the other hand, in more expensive areas, it may take longer.
Five ways to save tens of thousands of pounds within three years
Cutting back on spending for a while. We spend a staggering amount of money on non-essential things. For instance, the number of coffee shops in the UK has nearly doubled in the last 10 years, with an average spend of £3.50 per visit. Over three years, a visit to a coffee shop five times a week adds up to just over £2,000.
To save £5,500 over three years would mean you would have to find savings of just over £150 a month, or £35 a week, and double that if you are buying yourself.
Other savings you can make are: cutting back on holidays which can cost from a few hundred pounds to over £1,000; reducing expenditure on presents, or using retailer loyalty points to help pay for them; and seeing if you can cut things like utility bills by switching to a new provider.
Is it possible to rent somewhere cheaper?
Another way of cutting down on your costs would be to rent a smaller property in a cheaper area, or, if you have a spare bedroom, see if the landlord will be happy with you renting along with a friend.
It might not be quite what you want to do, even in the short term, but if the average rent in your area was £800 per month and you could find somewhere for £600 a month or a friend could help split the costs that would be a big saving over a few years.
Could you cope with renting a room not a whole property?
In the past, renting a room hasn’t been very glamorous. Properties were often in poor condition and you might not know, from one week to the next, who you were sharing with.
A lot has changed in this market over the last five years. Many room lets look like a posh hotel with smart landlords who make sure room sharers are hand-picked so everyone gets on well.
SpareRoom.co.uk’s research suggests renting a room is one of the best ways to help you save for a deposit. They calculated that renting a room versus a whole property could mean you save a 15% deposit in under three years! Average room rents, including bills, cost £75 per week, versus average rents of £700 per month, with bills on top. This means that renting a room could save you £4,500 a year in rent alone, and another £1,800 on top when you take the bills into account. So that’s £6,300, in just one year!
Check out SpareRoom’s calculator to work out how much you could save by renting a room in your area
Could you take on a second job?
lf you don’t fancy cutting back on your lifestyle, or aren’t spending much over and above your living costs, although it may be hard work, a second job may help.
Second jobs needn’t mean missing out on having fun. You could see if you could work in your local pub, find out if there is a job to do at the gym in return for free membership, or work part-time in a local clothing retailer that offers good discounts.
The best way: move back home, or in with friends
If you are lucky enough to get on with mum and dad, or have some good friends who have a spare room, you might be able to move back in. You don’t necessarily need to do it for the whole time you are saving, but even six months to a year could help you save several thousand pounds and get your deposit fund get started.
Alternatively, during the holiday season you could move from one empty home to another, looking after plants and pets while others are on their holidays – and some may even be happy to pay you on top for the service.
It is hard to give up things to buy your own home, especially over several years but, even in London, it is possible to become a homeowner
if you scrimp and save everything you can. If you can’t afford a home of your own in full, £5k-£10k savings will help you get on the ladder through some of the shared ownership – part buy part rent – schemes available.