The Financial Returns from Buying versus Renting: The experience of first time buyers in different regions of Britain

Research output: Contribution to journalArticle

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.
LanguageEnglish
Pages112-133
Number of pages22
JournalJournal of European Real Estate Research
Volume12
Issue number1
Early online date15 Mar 2019
DOIs
Publication statusPublished - 7 May 2019

Fingerprint

Financial returns
Buyers
Home ownership
Owners
Aspiration
Housing market
Market data
Mortgage market
Design methodology
20th century

Keywords

  • Capital gains
  • Financial returns
  • First time buyers
  • Owner occupation
  • Renting versus owning
  • Wealth

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

Cite this

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title = "The Financial Returns from Buying versus Renting: The experience of first time buyers in different regions of Britain",
abstract = "PurposeThe 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/approachIt applies a DCF approach based on historical housing and mortgage market data from 1975 to 2012.FindingsThe 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 implicationsIt gives a clear message of the financial benefits of homeownership over renting in Britain, even over very short time periods.Originality/valueThe paper is the first to apply a comprehensive DCF model to the choice between renting and owning.",
keywords = "Capital gains, Financial returns, First time buyers, Owner occupation, Renting versus owning, Wealth",
author = "Abdulkader Mostafa and Jones, {Colin Anthony}",
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N2 - PurposeThe 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/approachIt applies a DCF approach based on historical housing and mortgage market data from 1975 to 2012.FindingsThe 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 implicationsIt gives a clear message of the financial benefits of homeownership over renting in Britain, even over very short time periods.Originality/valueThe paper is the first to apply a comprehensive DCF model to the choice between renting and owning.

AB - PurposeThe 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/approachIt applies a DCF approach based on historical housing and mortgage market data from 1975 to 2012.FindingsThe 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 implicationsIt gives a clear message of the financial benefits of homeownership over renting in Britain, even over very short time periods.Originality/valueThe paper is the first to apply a comprehensive DCF model to the choice between renting and owning.

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