Paying steep London rents can feel like throwing money down the drain. But renting rather than buying might just be a better financial move – if you can afford it.
It might come as a surprise to some, but according to property website Zoopla, London is currently the most renter-friendly location in Britain.
Research showed that after seven years, a typical London renter is £82,412 better off than a buyer of an equivalent property who puts down a ten per cent deposit. And it would take 18 years for a London buyer with a ten per cent deposit to be financially better off compared to an equivalent renter.
Away from the capital, Bournemouth is the second most renter-friendly town and Aberdeen the most cost-effective place to buy. But Zoopla’s Lawrence Hall says that while London may be the holy grail for property investors, despite it taking longer for them to be better off, buyers struggle to raise deposits.
‘It is much more buyer-friendly outside the capital,’ he says, ‘but with rising average prices and low savings rates, saving for a deposit has become increasingly difficult.’
And despite renting being cheaper long term, most graduates find they can’t afford London rents.
Rentals website Rentonomy looked at which parts of the city are affordable on a typical graduate’s salary and found 90 per cent of central London is now even out of the reach of those happy to rent just a room.
The research looked at the cost of a room as a proportion of a salary with ‘affordable rent’ defined as less than 30 per cent of gross income. So, for an average graduate earning £22,400 per year, an unaffordable room costs over £129 a week or £560 per month.
Of London’s 48 ‘villages’ in Zones 1 and 2, only New Cross, Brockley, Walworth, Peckham, Deptford and Hackney are affordable. Graduates fare better in zone 3, where two-thirds of areas are affordable. Rentonomy’s David Butler admits even he didn’t realise the scale of the problem.
‘It’s shocking that young people are being squeezed out of inner London even if they’re prepared to massively compromise on space,’ he says.
Graduate Jennifer Keegan recently had to find somewhere cheaper to rent. She was sharing a Highbury flat in Zone 2 and split the £590 weekly rent with four others so paid £120 for her room – around 28 per cent of her income. When the landlord upped the rent by five per cent, Jennifer, 28, couldn’t afford it and looked on Rentonomy for a cheaper area.
The site helps you calculate rents across London and matches tenants with areas and properties. An interactive map helps you target the best areas for families, city workers and party animals and even points out the top spots for single men and women to live.
Jennifer’s match was Walthamstow in Zone 3, although she wasn’t sure about the area.
‘Before I moved I was fairly prejudiced against Walthamstow,’ she admits. ‘The only thing I knew was that the band East 17 came from there!’
She now pays £100 per week. ‘Now I live here I love it, it’s way cheaper and pretty much the same commuting time into work.
‘I can actually afford a bit more now but I don’t think I’m going to move back to Highbury or anywhere in central London anytime soon – it’s just not worth it.’