Rent vs. buy: is London’s property market changing?

There’s no doubt that it has been a challenging year for anyone thinking of buying or renting in London.

Although we have seen a gradual softening of prices in many areas, rising mortgage rates have made properties less affordable. London rents have also increased by 5.5 per cent in the year to July 2023, the highest rise since the Office for National Statistics began collecting the data in 2006.

All this has happened against a background of acute financial strain, as the cost of living crisis affected homeowners and renters across the capital. However, with 2024 fast approaching, it seems the financial storm clouds of 2023 could be beginning to lift.

Inflation dropped to 4.6 per cent in October 2023, down from 6.7 per cent in September. This has encouraged a number of analysts to predict that the recent cycle of interest rate rises may finally be coming to an end.

As the economic situation stabilises, there is a key question for anyone who is either setting up a home in London for the first time or considering their next move within the capital.

Is it cheaper to rent or buy in London?

This year, the average price of a one-bed London flat was £352,254, with an associated mortgage payment of £1,524 per month (based on the relatively high rate of 6.5 per cent). However, tenants renting a one-bed flat in the capital pay an average of £1,767 per month.

A quick calculation shows that you can save more than £243 per month (£2,916 a year) by buying in London rather than renting. It’s a substantial sum, but any comparison between the cost of purchasing and renting must always include the upfront costs involved in buying a property.

What costs must I pay when buying a home?

The largest amount of money you’ll need to find is the sum for the deposit, which ranges between £17,500 and £35,000 for a house costing £350,000. Other payments include professional fees and stamp duty, plus moving expenses and furnishings. You should also factor in the ongoing expenses associated with owning your own home, such as insurance, repair and maintenance.

Taken together, these costs are the main barrier preventing renters from becoming homeowners. While this expenditure can’t be avoided when buying a property, there are steps you can take to prevent costly delays and ease the burden on your finances.

• Talk to a mortgage advisor before you start to view properties so you know exactly what you can afford. If you can secure a mortgage offer in principle, you’ll be able to move faster and beat the competition when you are ready to make an offer.

• Instruct a solicitor early on in the process and make sure that all your paperwork is ready to submit as soon as the solicitor requests it.

If you are considering buying a home in London, why not start with our advice for first-time buyers? We can also direct you to some fantastic one and two bedroom properties, suitably priced to help you take that first step on the property ladder.

Can I still get a good deal on a London rental?

A shortage of rental properties in the capital has been largely responsible for the recent spike in rents. But even so, renting can offer a more flexible alternative to the financial commitment of home ownership. With a little patience, you should be able to find a deal to suit your finances: for example, a small compromise on your chosen area could result in a big reward in terms of the money you could save.

Local property market insight is essential when you are looking for a home to rent, and that’s where we come in. As an independent family-run firm founded in the 1990s, we have built up a wealth of knowledge, together with a wide network of local contacts.

Working from offices in Westminster, London Bridge, Kennington, and Clapham, and covering a wide area of central and south London, we pride ourselves on having something for everyone, from studio flats to family homes. We’re confident that we can help you find the perfect rental property within your budget.

What are the next steps for my London property search?

Whether you are looking to buy or rent, we would love to help you find your next home in London. Begin your search now, and you could be making plans to move by the new year.

Why not make a start today by talking to someone from our friendly, experienced sales or lettings teams?