London is the UK's most expensive property market — and the one where the buy vs rent decision is most finely balanced. With average house prices exceeding £500,000 and rents that seem to rise by the month, many Londoners are trapped between the desire to own and the financial reality of what ownership actually costs in the capital.
This analysis examines the buy vs rent equation across London's boroughs, using 2026 price and rental data to identify where buying makes financial sense, where renting and investing wins, and the break-even points for each area.
The London Problem: Extreme Price-to-Rent Ratios
The price-to-rent ratio is a useful indicator of whether a market favours buyers or renters. It's calculated as: Property Price / Annual Rent. A ratio below 15 generally favours buying; above 20 favours renting. London's average ratio in 2026 sits around 22–28, making it one of the most renter-favourable markets in the UK.
For context, a £500,000 flat renting at £2,000/month has a ratio of 20.8. A £750,000 house renting at £2,500/month has a ratio of 25.0. The higher the ratio, the longer it takes for buying to overtake renting in net worth terms.
Borough-by-Borough Comparison (2026 Data)
| Borough | Avg Property Price | Avg Rent (pcm) | Price:Rent Ratio | Verdict |
|---|---|---|---|---|
| Barking & Dagenham | £320,000 | £1,550 | 17.2 | ⚖️ Close |
| Bexley | £380,000 | £1,500 | 21.1 | 🔑 Rent-leaning |
| Bromley | £480,000 | £1,700 | 23.5 | 🔑 Rent-leaning |
| Camden | £850,000 | £2,600 | 27.2 | 🔑 Rent wins |
| Croydon | £385,000 | £1,550 | 20.7 | ⚖️ Close |
| Ealing | £510,000 | £1,850 | 23.0 | 🔑 Rent-leaning |
| Greenwich | £420,000 | £1,650 | 21.2 | 🔑 Rent-leaning |
| Hackney | £620,000 | £2,200 | 23.5 | 🔑 Rent-leaning |
| Hammersmith & Fulham | £780,000 | £2,400 | 27.1 | 🔑 Rent wins |
| Islington | £720,000 | £2,300 | 26.1 | 🔑 Rent wins |
| Kensington & Chelsea | £1,400,000 | £3,500 | 33.3 | 🔑 Rent wins |
| Lewisham | £400,000 | £1,600 | 20.8 | ⚖️ Close |
| Newham | £390,000 | £1,700 | 19.1 | 🏠 Buy-leaning |
| Southwark | £530,000 | £1,900 | 23.2 | 🔑 Rent-leaning |
| Tower Hamlets | £480,000 | £2,100 | 19.0 | 🏠 Buy-leaning |
| Wandsworth | £650,000 | £2,200 | 24.6 | 🔑 Rent wins |
| Westminster | £1,100,000 | £3,200 | 28.6 | 🔑 Rent wins |
Case Study: £500,000 Flat in Zone 2
Let's model a typical Zone 2 purchase using our Buy vs Rent Calculator:
- Purchase price: £500,000
- Deposit: £50,000 (10%)
- Mortgage: £450,000 at 4.5% over 25 years = £2,501/month
- Equivalent rent: £1,900/month
- Monthly surplus (renter): £601 invested at 7% return
- Stamp duty: £12,500 (added to renter's invested pot)
- Maintenance: 1% = £5,000/year
After 10 years (assuming 3.5% property growth):
- Buyer's net worth (equity): ~£281,000
- Renter's net worth (portfolio): ~£193,000
- Verdict: Buying wins by ~£88,000 after 10 years
However, if property growth drops to 2% (possible in an already-elevated London market):
- Buyer's net worth: ~£213,000
- Renter's net worth: ~£193,000
- Verdict: Very close — buying barely wins at year 10
This sensitivity to growth rate is what makes London uniquely challenging. Outside London, where rents are closer to mortgage payments and price-to-rent ratios are lower, buying wins much more convincingly.
Where Buying Still Makes Sense in London
Despite the high ratios, buying can still work in London if:
- You plan to stay 10+ years — Transaction costs dilute over longer holds
- You're buying in a regeneration area — Newham, Barking, parts of Croydon and Lewisham offer lower entry points with above-average growth potential
- Your rent would be very high anyway — In areas where rent approaches mortgage payments, the equity-building effect of ownership is powerful
- You have a large deposit — 25%+ deposits unlock lower mortgage rates, reducing monthly cost and interest burden
- You value stability — Section 21 notice reforms protect renters more, but ownership still offers certainty that renting cannot
Where Renting and Investing Wins
- Prime central London — Kensington, Chelsea, Westminster, Camden: extremely high ratios make renting far cheaper than owning
- Short-term residents — If you'll move within 5 years, buying costs (stamp duty + selling fees) make ownership financially destructive
- High earners who invest diligently — If you can discipline yourself to invest £1,000+/month into a Stocks & Shares ISA, the returns can exceed property appreciation
The Verdict for London in 2026
London remains the UK's most nuanced buy vs rent market. The blanket advice of "buying is always better" simply doesn't apply here. Our data shows that for most Zone 1–2 boroughs, renting and investing produces competitive or superior returns over 10 years, unless property growth exceeds 4% annually.
For outer boroughs with lower price-to-rent ratios (Newham, Tower Hamlets, Barking), buying becomes viable much sooner. The key variable isn't whether you buy or rent — it's whether you actually invest the difference.
Use our Buy vs Rent Calculator to model your specific London scenario, or check the Stamp Duty Calculator to see exactly how much SDLT you'd pay on your target property.