Price-to-Rent Ratio Calculator
Buy vs rent ratio.
Calculate price-to-rent ratio for buy-vs-rent decision making — the headline housing-affordability metric across cities.
What this tool does
Price-to-rent ratio divides a property's price by its annual rental income — a common measure for comparing housing affordability across different locations. Enter the property price and monthly rent to see the resulting ratio alongside context bands: under 15 suggests buying may be more economical relative to renting, 15–20 falls in a transition zone where either approach has merit, and 20 or above indicates rental costs are lower relative to purchase price. The calculation assumes stable rental rates and does not account for taxes, maintenance costs, financing terms, vacancy rates, or local market dynamics. Results are for educational comparison only and reflect the specific inputs you provide at a single point in time.
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Formula Used
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Disclaimer
Results are estimates for educational purposes only. They do not constitute financial advice. Consult a qualified professional before making financial decisions.
Price-to-rent ratio = property price ÷ annual rent. Standard guidance: under 15 = better to buy, 15-20 = marginal, over 20 = better to rent. Useful for comparing markets and deciding rent vs buy. Doesn't account for taxes, maintenance, opportunity cost - but quick directional indicator.
300,000 property × 1,500/month = 18,000 annual rent. Ratio: 300,000 / 18,000 = 16.7. Marginal buy/rent zone. Calculation favours buying if you intend to stay 5+ years and have low alternative investment returns. Favours renting if mobile career or strong investment alternatives.
Ratios typically high.: 25-35. typical: 18-22. average: 12-18. Higher ratios mean rent is cheap relative to property prices - usually good time to rent and invest difference. Lower ratios mean rent expensive relative to ownership - usually time to buy. Trends shift with interest rates and housing supply.
Run it with sensible defaults
Using property price of 300,000, monthly rent of 1,500, the calculation works out to 16.7. The defaults are meant as a starting point, not a recommendation.
The levers in this calculation
The inputs — Property Price and Monthly Rent — do not pull with equal force.
How the math works
Annual rent = monthly × 12. Ratio = price ÷ annual rent.
Where this fits in planning
This is a "what-if" tool, not a forecast. Use it to test ideas before committing: what happens if the rate is 2% lower than hoped, what happens if you add five more years. The value is in the scenarios you run, not the single answer you get from the defaults.
What this doesn't capture
Steady-rate math ignores real-world volatility. Actual returns are lumpy; sequence-of-returns risk matters most in drawdown; fees and taxes drag on compound growth; and behaviour changes in drawdowns can reduce outcomes below the projection. The number represents one scenario rather than a forecast.
££300,000 ÷ (££1,500 × 12) = 16.7.
Inputs
This example uses typical values for illustration. Adjust the inputs above to match a specific situation and see how the result changes.
Sources & Methodology
Methodology
This calculator computes the price-to-rent ratio, a metric used to compare property purchase costs against rental income. The calculation takes the property price and divides it by the annualised monthly rent (monthly rent multiplied by 12). The resulting ratio indicates how many years of rental income would theoretically equal the purchase price. The model assumes rental income remains constant year-on-year and treats the property as a pure income-generating asset. It does not account for property taxes, maintenance costs, insurance, vacancy rates, rental growth, property appreciation, transaction costs, or financing arrangements. The ratio is a simplified snapshot and should not be interpreted as a complete investment analysis.
References
Frequently Asked Questions
What ratio means what?
too high?
Hidden costs ignored?
Use for investment property?
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