The financial returns from buying versus renting: The experience of first-time buyers in different regions of Britain

Abstract

Purpose

The UK experienced a substantial rise in owner occupation over the twentieth century, and many tenants still aspire to homeownership. These strong aspirations to own are attributed to a set of financial and non-financial benefits. This paper aims to calculate, for the first time, the financial returns from buying versus renting in Britain for first-time buyers in 11 regions.

Design/methodology/approach

It applies a DCF approach based on historical housing and mortgage market data from 1975 to 2012.

Findings

The paper finds strong evidence that, in purely financial terms, buying has been always superior to renting in all regions of the UK over the period.

Practical implications

It gives a clear message of the financial benefits of homeownership over renting in Britain, even over very short time periods.

Originality/value

The paper is the first to apply a comprehensive DCF model to the choice between renting and owning.

Citation

Mostafa, A. and Jones, C.A. (2019), "The financial returns from buying versus renting: The experience of first-time buyers in different regions of Britain", Journal of European Real Estate Research, Vol. 12 No. 1, pp. 112-133. https://doi.org/10.1108/JERER-07-2018-0032