Renting or buying? - 21 January 2008

Posted by Paul Collins 1 comment

Disturbing news came into the office today. Things in the world of the first-time buyer are getting even more difficult, particularly if you are so insolent as to even try to live in a nice area.

It has emerged that, in order to get onto the property ladder in the university town of Cambridge with an average house, young buyers will need to have a household (you’d be lucky) salary in excess of £73,000. Not only is this one of the most expensive places in the UK for FTBs to try to lay their hat, but it will make many young people around the country depressed as to the state of their finances and their chances of getting somewhere to call their own anywhere in the near future.

The effect, you see, is not just in the monthly mortgage repayments that will be due to the buyers of the no-doubt tiny starter homes in the area, but also in the size of the deposit that will need to be available to secure the damn place to start with. For if you need to have a joint income that is equal to or exceeding many of the director-level posts in this country, it means the starting price will induce shudders in even the most jaded and cynical FTB.

And my empathy stretches further than the mere ramblings of a concerned hack. Following a series of changes of circumstance in the past few years, I personally am currently renting. As my landlord seeks, legitimately, to maximize their investment, I am finding that the amount of rent I have to pay is growing significantly. More to the point, the amount I pay in rent to someone else, as a proportion of my income, is rising alarmingly. In fact, I am paying the same in rent as a single person leasing a room in a shared house as some of my friends are paying for their mortgages as a couple.

This leads me to the crux of this entry. Why? Why am I paying this to someone else instead of into my own property? Unfortunately, the market has moved on somewhat since the friends I described bought their house, and the kind of deal they got is no longer available. But still, it is somewhat galling to pay that money out each month, and to get nothing back at the end of it.

So where do I go from here? I love where I live, but the financial commitment is beginning to weigh heavily, and to a certain extent is making me resent the property and what it represents. But at the same time, if the example of Cambridge is anything to go by, there is a long way to go before I can afford anything that even the local mice don’t avoid.

Does this mean that there is a burgeoning rental trap out there? Is it a common thing for people to be renting a property but to be unable to make the leap to buying themselves because the market and prices have grown too quickly? If so, what is the solution? I’ll let you know when I have come up with an answer…

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