Rent vs Buy

[Char1y]

Dear gals (and guys if any),

I would very much appreciate opinions on this major decision we are about to make.
We are moving to Edinburgh in August (I already asked for your help with schools and we are applying to 5: GW, GH, EA, Clifton Hall and Erskine Stewart's Melville - thanks everyone).

Back to my topic. Being a geek I developed a spreadsheet comparing the costs of buying versus renting for our situation (around 200K house) under a variety of scenarios: inflation range (1% - 4%), rent-to-price ratio, APR (int. rate) on the mortgage, loan-to-value ratio. I have made some simplifying assumptions like: house price grows at the same inflation rate as the rent, the discount rate for all calculations is the same as the APR on the mortgage. But I have tried to be very realistic in all other respects by incorporating all fees, maintenance costs, insurance, taxes, etc., associated with buying property.

Overall, the results show that:
Buying is better than Renting if:
the rent-to-price ratio is above0.35% (i.e. £700 rent for a £200,000 house),
Inflation is more or around 2% and
APR is higher than 3.5% (it currently is 5% for fixed rate loans)

My first question is: What are rents and prices like in the city, not necessarily in the very centre, but in good neighbourhoods.
I did look at ESPC, but there are very few rent offers available and it is impossible to get a good idea what the rent-to-price ratio is for the same neighbourhood.

I would love for us to be in the city, but DH prefers rural environment and if we end up choosing Clifton Hall (outside the city), there will be too many factors against me. On top of that we are ourdoorsy people and tend to go on nature trips every weekend.

Question 2: What other arguments can you give me for living in the city, except the obvious one that Edinburgh is gorgeous.

Obviously for some borderline values of the driving variables in my spreadsheet the difference between renting and buying may be relatively small (eg. £5,000 in present value terms over a 25-year horizon) and in this case I would lean towards buying because I greatly dislike moving.

However, our jobs have taken us around the world every 5 -6 years and even though I am more excited to settle in Edinburgh than I have ever been before (even compared to when we moved to Montreal), I have to allow that a fantastic job offer may come along and move us across the Atlantic in a couple of years.

We have always rented wherever we have lived so far and in hindsight I am glad because it was easier to move, but I feel like finally settling down.

Questions 3: How do you all stand on renting vs buying?

Thank you in advance. I hope my post is not too technical.

Our mortgage is a lot lower than the rental prices for our area. 2 houses near by us are £975 and £800 for a semi 3 bedroomed house. Compared to our mortgage that would mean we couldn't afford to live where we are. We live close to the Gyle and the airport which are easy accesses to go out and a train from South Gyle in to town in 10 minutes or by bus in around 20 minutes. Although I've noticed house prices round here seem to be falling compared to in recent years.

Thank you Groovee.
It might be that you put more money down on the mortgage and it also depends on its term (10, 15, 20, 25 years) - these things affect the mortgage payment.
The rents you have given me are very helpful, thanks again!

Hi there. We live in close to the centre - southside (Morningside, Bruntsfield, Marchmont) - and rents and mortgage payments are about equal for us. I've been looking into it as we are going to sell soon. We have a 3 bed flat and it would rent for about £1000 pcm. Our mortgage is 20 year and largish but not crazy huge....hope that helps!

It depends what areas you are looking at and how many bedrooms you need but you might struggle to get a house for £200,000. There are obviously lots of houses in that price range but not near the schools you are looking at. Having looked recently at houses to rent in Buckstone they were around £850 for a small 3 bedroom house.

Best place to look for rentals in s1 rentals.

Thank you WillPenn, I looked at the 3-bedroom properties in the Morningside, Bruntsfield, Marchmont area, the prices range from 230K to 360K, I wonder whether the rents vary the same way. There is only one 3-bed listed in Morningside for rent at £800, which seems low, probably because it is winter. After looking at historical data on rents, it appears they are every seasonally cyclical.
Jac13, you are absolutely correct about prices being a lot higher than 200K in that area. I am guessing that there might be a premium because of the good state schools. If we are going for an independent school, perhaps we don't need to live in the same neighbourhood.
k999, thanks for the s1rental link, there are a few more offers there, but still not many.
Thank you all again.

If you choose Clifton Hall school which is in a beautiful setting in the country but want to live in the city, did you know that they run a school bus that transports the pupils there and brings them back?

How about looking at rental flats here

www.lettingweb.com/properties/regions/scotland/lothian/edinburgh/

@solyluna: Yes, I had seen their bus service and that is why am considering different areas of the city to live.
Thanks for this AnneinEdinburgh, this site has the most rent offers I have seen so far.

try citylets too. ... We've been renting for ther past while and it's £850 for 2 beds and box flat around bruntsfield area. £800 for 3 rooms if you're prepared to climb stairs in this area correct.

Not knocking your choice but why private as we have some excellent state schools (Boroughmuir High is being rebuilt in 2018 and will be all mod cons etc). Houses in the area though are not cheap. If you want a nice 3 bed villa (old) you're looking at £500K around these parts.

Can you actually buy a house in Edinburgh for £200K nowadays? Sure if you went over the bypass you could get something nice for this budget but you'd have to travel. £200K in town wouldn't buy you a pot to piss in sadly - well a nice one bed flat in a good area. A friend is selling a nice modern 4 bed in Tranent for just over £200K - looks lovely but I wouldn't fancy the commute into town (personal choice though)

I think if I went for private education I would live out of the city as it is cheaper (can get a garden).

@lollystix: I have up-ed our buying budget after looking at prices in the city. Although I have not excluded completely the suburbs. We have opted for private because we would prefer for ds not to move schools again after one or two years (he will be P6 this coming year). I do hear and read how good Boroughmuir is and if we end up living close by, it will always be an option if ds wants to move at some point.
Thanks so much for the rent numbers, I think I have a better picture now and will start planning a trip to Edinburgh and line up some properties to look at.
@iggly2, that's exactly what dh says and I may be swayed considering our budget constraints. However, I would rather live in the city, preferably close to the school we end up choosing because I would like for ds (being an only child) to form friendships and get together with his friends from school more often.
I looked at all the schools we are applying to on the map and one appeared kind of away from the others, and obviously Clifton Hall is out of the city completely. So I am thinking on our first visit, we will look at 1-2 properties in several different areas to form a broad feel for the range of things to choose from and once we have settled on a school in a month or so I expect, we can narrow down the hunt.
Here is my spreadsheet for other curious geeks:
kancamaga.wordpress.com/2012/02/02/comparison-of-renting-and-buying/
(if you do download it, play by varying the inputs and I welcome any feedback)

You can buy houses in town if they don't need to be very pretty and old. They aren't typical Edinburgh properties but they do exist. Search for city centre houses on the ESPC and see what comes up. We have one in Tollcross in the catchment for Bruntsfield/Boroughmuir - 3 bed 80's house with small garden and paid about 240k for it right by the Meadows. There are also a lot of similar around the top of Leith Walk - 10 min walk into town. Look at Annandale Street and around. The houses are fine inside but not pretty and old outside. We were looking for a flat but ended up with a house and it was right for us.

Good luck with it all!

Buckstone in south Edinburgh is a good area especially if you go with GW or GH. Not beautiful houses but more affordable -£250kish. Very close to town, good bus route and nice area. Also swanston which is just nearby and colinton is also lovely.

Ps boroughmuir is very good but the building itself is totally crap and until the new version is completed in 2018 your son would be in the old one. No sporting facilities on site - google earth it and you'll see.

Great community feel in the morningside/bruntsfield/merchiston area but we do all live ontop of each other and no real space. Tenement living can really be the pits tbh - I've done 11 years of it and whilst the flats are beautiful I can't take much more of the students, mice and leaking bathrooms. I think if you've come from a house you may struggle but I've known no different.

Just one more I promise I'll go away - corstorphine is great too - nice family area, great buses and affordable in parts BUT don't know which private schools it's near.

Questions 3: How do you all stand on renting vs buying?

I can't answer the questions about the city, don't know it well enough. But on the rent vs. buy I'd say it depends on what you want from the property and over what time.

A serious amount of work gone into looking at the inflation factors, well done you! But, inflation will have a limited impact over such a short period of time. If you rent long term you are unlikely to get any significant rent rise, it is easier to give notice and leave and you don't have to worry about maintenance.

If you buy, you could fix the rate (will need to find a reasonable amount for deposit) and then you will also have certainty of payments and not be affected by inflation if you had a 5 year fix say.

Personnally, I think if you are unsure the best bet is renting. The market will stay fairly static until something happens to the base rate and that isn't going to move any time soon.

Had you considered renting yourself, to give you freedom, and investing in a buy-to-let property anywhere in the country which you rent out to build equity over the long term?

Corstorphine would be ok for Stuarts Melville. If you drive, and come up to Murrayfield and then the back road under the railway bridge you can get to Watsons in a surprisingly short time, but that road is closed for frameworks for the next 18 months.

@Annein Edinburgh
Anne, your suggestion was very useful, thank you! There are a few properties in Tollcross, Bellevue, Comely Bank, even the Old Town. I know what you mean, esp. by this flat: www.espc.com/properties/details.aspx?pid=307873&sid=3349309433
Very nicely done on the inside but quite bland on the outside.
I feel like we have more options now.
@lollystix
There is only one property listed right now in Buckstone under 300K - a terraced house 225K, I don't mind too much if the building is new, and not old and traditional.
I especially liked one in Colinton, again new developments but with a Tudor flavor, a bit high at 285K. I liked a huge flat (110m2) bright and new at 220K but seems to far in Slateford.
So, over all, the trade-off is clear: smaller older flat in a desirable area and traditional architecture versus new developments further out of the city - could be a house or a flat. And we are talking 50K+ difference in prices.
In your description of tenement living was also useful, we know to get ready for mice and leaky bathrooms if we decide on that:) How have students annoyed you? Noisy and partying all the time? I guess that is a problem with young kids.
@TheWicketKeeperIsDown
Thank you for this smart hint on driving to Watsons, yes we will be bringing our car so I will keep this in mind.
And as I said earlier, we will look in several different areas, so all your suggestions are very useful to build a list for our visit.
@tinypandatwo
Thank you for looking at my spreadsheet, and for the insights. I agree that the base rate is likely to stay low in the next few years until the economy picks itself up. Just today The Economist has an article explaining how volumes in the residential market have dropped dramatically but prices have gone down only by 10% and are staying stable.
Just a bit of clarification on my set-up, in the buying option inflation only works in favor, because it increases the value of the property and the expected future selling price is netted in the end result.
Now, your last suggestion I will give very serious thought. We have lived in the midlands for 3 years now and have a good idea of the area, prices here are way more affordable than in Edinburgh. The only thing is that if we buy to let, this means another source of hassle - we'd have to hire a management service and look after the property. But deserves very serious consideration. Thanks again.

I've lived top, 2nd and ground floor. Top best IMO - u benefit from others heat (ours bills almost double on ground floor, you have no one above to leak into you (I've had 3 bathroom leaks from flats above - one took 5 months to resolve) and no stair traffic past your door which can be very noisy. Students can really be a total nightmare - luck if the draw who you get but if you choose smaller flat in non student area you should be fine. Southside notorious for students as larger flats.

You will struggle to find a house in that budget. Definitely won't get one near the city centre. You will be able to rent in the city centre for less than to buy I reckon.

For me a house was important - check out the Currie, Balerno, Juniper Green corridor - you could buy a 3 bed house with drive and garage in Currie or Balerno for

I'd weigh up the rental:price ratio carefully if you are going to buy elsewhere, rent it out and rent in Edinburgh. I have friends who have chosen to do the opposite, keeping on the Edinburgh property (renting it out) as the rent from it covers a much better place elsewhere (they are in Bath and York). I doubt you will get rent in the midlands which will cover your Edinburgh rent, and the added hassle. If you had a flat in the SE it might make sense but I think Edinburgh has fairly high rental vs buying prices. City centre houses would be a premium (it isn't a city which can just expand out, being in a valley) and quite a lot of the rental properties are aimed at students, with short tenancies often Sept-July, with the property rented out at a ridiculous rate during August for the festival.

What you said about your son moving school twice - nearly all the state primaries are feeder schools for a defined secondary, so he would be moving with everyone else in his class to the same place.

Good luck!

I would personally really think carefully before getting a flat in Marchmont or Bruntsfield. It really is student central. Before we moved where we are now, we owned a really nice flat in Marchmont. When we moved in, there was a high ratio of owners:renters, which is unusual in those tenements. As usual, the top 2 flats in the close were rented by about 6 people each (they are double floored) and initially were great. Over the 3 years we were there, things steadily went downhill to the point where it was unknown to get a full night's sleep because of parties (which were NEVER on a Friday or Saturday night and we never got notice), their visitors buzzing the wrong buzzer on the door entry system etc etc etc. Relations within the close really deteriorated and we got bugger all help from the landlords of the culprits. There were 2 families with small children and they were at their wits end, with their wee ones being continually woken up. This is unfortunately not an unusual situation in these areas.

Thewicket- so familiar. We had a year with 3 kids awake at 4am every weds and Sunday night and we'd have to do a full days work on it. The buzzers - 'i've lost my key- can you let me in'. I have a friend who has moved into a tenement nearby and after 6 months she's back in the market and they are in total despair with tenement living (their first time having come from a house).

I think Comley bank flats would be totally different ballgame though. Just not southside.

I lived in Comely Bank before Marchmont and there is no doubt that it is much, much quieter. Students are a fairly rare breed there, although again we were unlucky with a change in tenants before moving and it wasn't the quiet haven it had been before.