Third of London homes cheaper to buy than to rent as prices fall
More than a third of London homes are now cheaper to buy than to rent as house prices in the capital shrunk in the last year.
The proportion of London houses which are cheaper to buy with a mortgage has doubled since last year, from 18 to 36 per cent, while still lower than the 40 per cent national average, Zoopla’s house price index has revealed.
February is set to notch a decade-record number of newly listed homes on the national market in a sign confidence is returning to the housing market following a long hangover from Budget speculation.
Housebuying activity rebounded at the start of the year with a sharp increase from the end of 2024, though the number of sales agreed remains three per cent below February’ 2025’s housing flurry.
Boost for first-time buyers
Falling mortgage rates mean first-time buyers have access to some of the best deals in several years, according to Zoopla.
Mortgage rates for both two-year and five-year fixed-term deals have dipped below four per cent for the first time since 2022.
This means 40 per cent of UK homes listed on Zoopla are cheaper to buy on a 30-year mortgage than to rent with a 20 per cent deposit – up from 25 per cent year-on-year.
This proportion rises to more than half in some regions of the country, like the North and Scotland.
Richard Donnell, Zoopla’s executive director, said: “Lower mortgage rates and improved affordability of mortgages means now could very well be the best time to buy a home in recent years, especially for first time buyers with more homes available to buy for less than the cost of renting.”
London house prices slip
The number of homes for sale in the capital is 16 per cent higher than this time last year, far overshooting the six per cent national average.
London house prices fell by 0.2 per cent year on year, compared to 1.3 per cent national price inflation, which remains subdued compared to recent trends.
Last week, housing experts warned supply in the capital was beginning to outstrip demand.
Tom Bill, head of UK residential research at Knight Frank, said: “House prices are being kept in check by rising supply as plans delayed by last year’s Budget are activated and more landlords attempt to sell due to red tape.”
House market plans will likely be delayed further once a potential Labour leadership race kicks off, he said.
Nathan Emerson, chief executive of Propertymark, said rising house prices must be matched by a significant boost to the number of affordable homes.
Labour has pledged to build 1.5m homes before the next election, including 440,000 in London, but current progress indicates this promise could be in jeopardy.
Emerson said: “Meeting housing delivery targets will be crucial to ensuring long-term affordability and preventing buyers from being priced out of areas seen as more attainable.”