The numbers say buying is cheaper than renting in Derby...

A few weeks ago, my article about why Derby twenty somethings aren’t buying anymore, caused a number of landlords to contact me. So much so, I want to revisit the story for a second time as some landlords are concerned demand will dry up as people start to buy instead of rent.

So .. Renting verses Buying in Derby – Which is best? An intriguing question, yes? Or one which would appear patently obvious to answer? Surely we are all in this to own our own property one day rather than paying out large sums of what is essentially ‘dead’ money, as some like to call it, in rent. Or is there a little more to it than that?

Let’s firstly look at a typical property sale. In Alvaston, there are a number of three bedroom semis for sale at £110,000. Say a first time buyer bought it for £103,500 working off a typical mortgage rate of 3.89%, with a 30 year repayment plan and based on an initial deposit of £5,175, the monthly repayments would be £464 per month. This property would typically fetch approximately £550 per calendar month.

So, it’s cheaper to buy then rent, so it would appear as though the answer is obvious. Buying must be the way to go. The sales market must be booming, but yet in a lot of cases it is not, and the number of people choosing to rent continues to grow. Besides the numbers, it’s clear that a certain percentage of people still favour renting than buying. The National Centre for Social Research Report backs this up pointing to a shift in attitudes from previous generations when buying at the first opportunity was the ‘done thing’.

Although in pure monetary terms, buying seems like the best option, first time buyers are clearly also considering the risk associated with owning their own property. The reasons for that reluctance to buy are many and varied, but here are some of my thoughts.

Firstly, it’s a big financial commitment –first timers need to be sure they can afford what they’re taking on. Also, when interest rates rise, repayments will also go up. New homeowners also need to be sure they can afford maintenance costs such as replacing a boiler if it packs up or fixing a leaky roof. If you stretch yourself too much when you buy you may resent not having money for meals out, holidays and entertainment.

You have less flexibility than when renting. For example, if you want to move for work or personal reasons selling up and moving on is far more expensive if you own as you’ll have all of the associated estate agency and legal fees. Also bear in mind that it may not always be easy to sell your home – (it was really tough to sell a property in Derby in 2008 and 2009) so it’ll be dependent on what’s happening in the market. Finally, If you’re living with someone else and split up, the process of sorting out the property will be far more complicated and expensive

Buying and owning your own home is certainly what the majority of us continue to strive towards, and but now more than ever ‘Generation Rent’ continues to gather considerable momentum and shows no sign of slowing down in the future.

No doubt this will be welcomed news amongst Derby’s landlords and investors.

I pride myself by knowing the market with all its ups and downs, so I can give some great advice and opinion. It might not be what you want to hear but, I can assure you,it is what you need to hear!

      

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