31% of UK millennials own their own homes, according to analysis of research by HSBC, which studied over 9,000 households in nine countries, by Douglas and Gordon.
As such, a case for both renting and buying in London – one of the most expensive rental markets in the world – can easily be made.
With such polarised opinions on which option is smarter financially, economically and in the long-term, deciding whether to rent or buy is a difficult decision for anyone stepping onto the property ladder for the first time. But, despite an increase in people choosing to rent, buying may actually save you money over time.
Rent vs. buy
Renting can be a worthwhile option for anyone who needs flexibility, and, with the high costs of buying, mortgage fees, Stamp Duty and more, renting is also easier on the budget in the short-term. However, according to a study on buying versus renting for the International Review of Financial Analysis, “increases in inflation and imputed rent top the balance in favour of ownership”.
Gap is narrowing
Despite a growing rental market in London and rent costs being more affordable across more than half of British cities, data suggests that the gap between buying and renting is narrowing. Halifax data shows that buying is financially better for first timers in the long-run, as those looking to enter the property market can save up to £651 per year by buying rather than renting.
The gap between the cost of buying and renting has narrowed by £19 a month since 2016, which is largely due to the rise in house prices for first time buyers.
House prices continue to rise
House prices in the UK have increased by 5.4% over the past year, with the average property value in London rising from £472,718 in December 2016 to £483,568 in September 2017, according to the Land Registry.
On the other hand, average weekly earnings for employees in Britain dropped by 0.4% in the last year.
Number of renters doubling
According to trends, more people are opting to rent in London than buy. Figures from the Parliamentary Research Briefings between 1996-2016 show that private renting has more than doubled, while the growth of owner-occupier homes has been much slower.
This is largely due to house price increases rapidly outstripping average wage growth and the fact that many first time buyers are unable to save enough for a deposit, with the average deposit for a London home being £94,088.
As a result, the age of people entering the UK property market in the capital is 32-years-old, while research shows that around 29% require help from their parents to pay a deposit.
31% of millennials own their own homes
Research by HSBC, which studied over 9,000 people in nine countries, found that four out of every ten millennials own their own homes. China ranks highest, with 70% of millennials owning a home, compared to just 31% in the UK.
Will this figure decline as the cost of buying continues to rise?