The pandemic has made it cheaper for Britons to rent a home rather than buy for the first time in seven years, despite rents rising over the past year, according to Hamptons.
The average tenant in the UK spent £71 ($100) a month less on rent in May than if they were servicing a 90 per cent loan-to-value mortgage on the same home, research from the real estate agency found.
In comparison, a buyer purchasing a property with a 10 per cent mortgage deposit before the pandemic started would have been £102 better off if they bought a home rather than renting one.
Aneisha Beveridge, Head of Research at Hamptons, said the pandemic has reversed the trend of buying being more cost-effective than renting because of strong house price growth and higher mortgage rates.
“A year ago, lenders were either increasing their rates or withdrawing higher loan-to-value mortgages altogether,” Ms Beveridge said.
“For first-time buyers in particular this pushed up the cost of paying a mortgage, if they could get one at all, to well above the cost of renting.”
Hamptons' cost comparison analysis between renting and buying is based on a consumer placing a 10 per cent deposit on a home to secure a 90 per cent mortgage on a two-year fixed rate. The average annual rate in May was 3.32 per cent, up from 1.94 per cent a year earlier.
The cost of servicing this mortgage is then compared to the cost of renting the same home.
Britain's property market has soared since the start of the pandemic, after a total shutdown of the sector during the first lockdown led to pent-up demand for homes.
Chancellor of the Exchequer Rishi Sunak's stamp duty holiday, first unveiled in July last year and set to expire on June 30, bolstered the market further.
In May, prices surged to an average record high of £261,743, according to the Halifax House Price Index, up 9.5 per cent from the same month a year earlier – equivalent to £22,000 over 12 months.
Meanwhile, rental growth accelerated in May to a record high, with the average cost of a newly-let rental home rising to £1,054 per month, up 7.1 per cent from the same month last year, according to Hamptons’ Monthly Lettings Index.
The regions recording the biggest rises included south-east England, where rents rose 13 per cent and south-west England, with an increase of 11.5 per cent, as many Britons moved out of cities in search of larger homes due to the pandemic.
As a result, London was the only UK region where rents fell, declining 0.5 per cent on the year in May.
While it is currently more cost-effective to rent, Ms Beveridge expects the balance to swing back towards buying once mortgage rates edge down again, although this will be partly offset by rising house prices.
"While interest rates are falling, they’re still considerably above where they were pre-pandemic on higher loan-to-value loans," said Ms Beveridge.
"Despite this, we expect the gap between renting and buying to close over the remainder of this year, moving back towards longer-term levels in 2022.”
Ten tax points to be aware of in 2026
1. Domestic VAT refund amendments: request your refund within five years
If a business does not apply for the refund on time, they lose their credit.
2. E-invoicing in the UAE
Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption.
3. More tax audits
Tax authorities are increasingly using data already available across multiple filings to identify audit risks.
4. More beneficial VAT and excise tax penalty regime
Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.
5. Greater emphasis on statutory audit
There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.
6. Further transfer pricing enforcement
Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.
7. Limited time periods for audits
Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.
8. Pillar 2 implementation
Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.
9. Reduced compliance obligations for imported goods and services
Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations.
10. Substance and CbC reporting focus
Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity.
Contributed by Thomas Vanhee and Hend Rashwan, Aurifer
The Brutalist
Director: Brady Corbet
Stars: Adrien Brody, Felicity Jones, Guy Pearce, Joe Alwyn
Rating: 3.5/5
Race card
5pm: Maiden (PA) Dh80,000 (Turf) 1,600m
5.30pm: Handicap (PA) Dh80,000 (T) 1,600m
6pm: Arabian Triple Crown Round-1 Listed (PA) Dh230,000 (T) 1,600m
6.30pm: Wathba Stallions Cup Handicap (PA) Dh70,000 (T) 1,400m
7pm: Maiden (PA) Dh80,000 (T) 1,200m
7.30pm: Handicap (TB) Dh100,000 (T) 2,400m
