Buying over renting could save £7,406 per month on a £10m London property
Despite the costs implications of purchasing high-end properties at the £10m mark, buying rather than renting in London could save £7,406 per month according to research by high-net-worth (HNW) broker Enness Global.
Should a £10m house be purchased as a second home, the deposit, second home stamp duty tax, legal fees and the other costs involved can total as much as £4.5m.
In London, based on current values per square foot in the high-end rental market, the average cost of renting a property worth £10m is £18,489 per month.
However, a high-end European buyer with a clean financial record could secure a mortgage on the same property with a 70% loan-to-value (LTV), a £3m deposit and with an interest rate as low as 1.9% per annum.
That would result in the monthly interest on their loan totalling £133,000 a year, or £11,083 per month – a difference of £7,406 between the monthly cost of renting and the monthly cost of mortgage interest.
On a £20m property, the average cost of renting £26,180 per month, while the cost of mortgage interest would reach just £22,167 each month.
Hugh Wade-Jones, managing director of Enness Global Mortgages, said: “We encounter a large number of high-net individuals who opt to rent and they do so for two reasons.
“Firstly, it enables them to dip in and out of various cities around the world during different points in the year.
“However, it also allows them to upgrade their home to stay at the top of the property pecking order.
“Should they find someone else has snapped up a better property, they will go on the hunt for something even more impressive, whether it be size, mod cons or location.”
He added: “You may think those in the market for [£10m and £20m] houses don’t care whether they buy or rent and to some extent, this might be true.
“That said, the majority of high-net individuals we work with are highly intelligent businessmen and women, and so it’s more of a case of making smart investments over the actual money-saving itself.
“Renting does provide a more versatile way of living for some.
“However, for the same monthly cost they could pay the interest on a mortgage, a proportion of the mortgage balance itself, and actually own the property as a result.
“Renting, on the other hand, is a monthly cost that equates to nothing more than money down the drain, so to speak.”