If you’re weighing up the pros and cons of buying a house or renting in London in 2023, you’re facing one of the biggest decisions you’ll ever make – so it’s reasonable to be cautious (and perhaps a little daunted, too).
The big question is “Should I rent or buy a house?” but there are lots of little questions that go into the answer. Do you have a deposit? Is renting a waste of money? How do you buy a house in London anyway?
In this Black Brick Property Guide we’re taking an honest look at the benefits and problems of renting and buying a house in London in 2023. Whether you’re a first-time buyer, new to the UK or house-hunting in the capital for the first time, we aim to take the mystery – and the doubt – out of the process so you’re able to move forward with confidence.
Buying a house vs. renting is a big step, so make sure you read our Black Brick Property Guide ‘What to Consider Before Buying a House’ so you know what to expect.
If you’re still wondering “Should I rent or buy a house?” let’s look at some of the pros and cons of buying property in London in 2023, before we move on to consider renting and whether it’s a waste of money or not.
Buying a house is an investment. While there’s some upfront expense (stamp duty being the biggest cost) and (if you’re buying with a mortgage) you’re also taking on a lot of debt, in the long run you’re going to end up with an asset worth over half a million pounds on average.
Mortgages are among the cheapest debt you can take on. So if you don’t have the money to make a cash purchase, buying a house is still one of the most affordable ways to build some capital in a highly desirable asset.
Remember, once you buy a house, your monthly mortgage payment goes towards paying off the interest and (in most cases) repaying the capital loan too – so you’re gaining equity all the time, compared with just paying rent on a monthly basis with no future benefit. Make sure to weigh up your mortgage options by speaking to a reputable independent mortgage broker. At Black Brick we work with a number of tried and tested brokers and private banks and are happy to connect you.
As a long-term investment with a substantial debt attached, buying a property is always a gamble. In general, house prices trend upwards over time, but there is considerable short-term volatility associated with this, especially during an economic slump.
If you buy a property just before a recession hits, you can be left with a number of affordability problems:
The worst-case scenario for mortgagors is when the value of your property falls below the amount you still owe on your loan. This scenario is called ‘negative equity’ and unless you can repay the net balance of your mortgage, you might find you are unable to sell your property.
If you’re looking at buying property in London in 2023, read our Black Brick Property Guide ‘Why is it so hard to buy a home in London?’ for some essential support and guidance.
We look at some of the specific challenges of the London property market, such as even getting to view properties in a climate where a high percentage are sold off-market (i.e. without being advertised by an estate agent).
Remember, estate agents work for the vendor. As a buyer, you’re only directly represented in the transaction if you work with a professional property buying agent like Black Brick.
With all of that said, is renting a waste of money, or is it sensible in an uncertain London property market? Black Brick’s rental search can help you to see what’s out there and weigh up the options available to you right now.
Whether buying a house or renting in London in 2023, the first challenge is to find a property you like. In many cases, if you can’t find something you want to buy, renting is a good option until something suitable comes on to the market.
So why do people choose to rent property in London long-term? There are plenty of good reasons to do so, including:
Another big benefit depends on how much time you actually spend in London. If you’re just looking for a weeknight crash pad, renting an apartment could be preferable to the long-term commitment of buying a property in London outright. In addition if you aren’t sure of what area you want to live in then renting can be a great way of trying out an area before committing to a purchase.
Renting is not without its drawbacks. Unlike buying a property in your own name, renting gives you no long-term claim to the home. There are protections in place so you can’t be evicted without notice, but your monthly rent doesn’t buy any equity stake.
Your usage of the property might be limited too. For instance, your tenancy agreement might not allow pets, or you might not be allowed to make permanent alterations or decorations to the interiors.
Ultimately, renting puts much of the power in the hands of your landlord, whereas when you buy a property of your own, there are much fewer restrictions on how you can use it.
So returning to that big question: “Should I rent or buy a house?” The answer as always is that it depends on your personal circumstances. But there are a few key factors that can help you to decide:
Do you have the money to put down a deposit on a property in London? At 10% of the average London asking price, you’ll need at least £50,000 deposit. Even at the lower end of the market, this can be an insurmountable obstacle for first-time buyers, making renting the only viable option.
How long do you spend in London? If you’re in the capital for most of the time (i.e. it’s your primary place of residence) you might want to buy a homestead in the city. If you commute for work or live abroad and want a second home in the UK, then it depends on the level of commitment you want to put into the London housing market.
Are you planning to keep the same property for more than a year or two? Buying is a big process if you’re going to move in less than five years’ time, and you won’t get back your stamp duty, solicitor, survey and cost of borrowing fees. On the other hand, if you don’t want to be restricted by a tenancy agreement on a rented property and plan to live in the property for the medium to long term then buying outright is the way to go.
Both buying and renting property in London have their pros and cons, as you might expect, and to a large extent it depends on the current and foreseeable future housing market.
We would be delighted to hear from you to discuss your own property requirements. For a non-obligatory consultation, please contact us.