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 we like to call it. Or is there a little more to it than that?
Let’s firstly look at a typical sale. In Greater Leys, Oxford there is a 2 bedroom mid terrace house for sale at £230,000. Working off a typical mortgage rate of 3.5%, with a 30 year repayment plan and based on an initial deposit of £12,000 (5%), the monthly repayments would be £979. Over this period the total repayable sum amounts to £352,400.
Turning my attention to the rental side and this property would fetch approx. £950 per calendar month. Over a typical 12 month tenancy this would cost a tenant £11400 in rent. Calculated over the same mortgage period and renting this property has cost the tenant £342,000.
In this case the difference between renting and owning is just over £10k 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 clear that a certain percentage of people still favour renting than buying. The National Centre for Social Research report, 2014 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. I point to the some of the following examples of why there is still a reluctance to buy:
•It’s a big financial commitment –first timers need to be sure they can afford what they’re taking on.
•When interest rates rise, repayments will also go up. It’s important to know how much a rise would be.
•New homeowners also need to be sure you 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’ll be dependent on what’s happening in the market
•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 Oxford’s landlords and investors.
For your Oxford Market property update please visit my blog at www.oxfordpropertyblog.co.uk