Is renting cheaper than buying?
Friday, 17 August 2012 9:56 AM
Short-term renting is a cheaper option than buying in the majority of the UK according to Rightmove and Savills research.
It is 21 per cent more expensive to buy than rent the average two bedroom property in the UK after capital repayments.
With a first-time buyer deposit of just 10 per cent that figure rises to 50 per cent.
However the negative effect is largely based on the short term, with buying the most prudent long term choice.
The fear though is that many people are trapped renting due to the prohibitive costs at the start of the home buying process.
Over half of renters and homeowners wrongly believe that it is cheaper to buy than rent in the short term, most notably in London and the South East where the perception is that rents are skyrocketing but in reality buying is initially the pricier option.
However the long term benefits are clear - research by Savills estimates that house price growth over the last 25 years has added an average £3,500 to a buyer's overall wealth in the first year of home ownership.
Lucian Cook, director of Savills Global research, warned that much analysis of the relative costs of buying compared to renting fails to take the costs of capital repayments into account.
"Even for those lucky enough to have accumulated a sufficient deposit to allow them to buy in theory, in practice the additional annual cost will inevitably leave some would be first time buyers frozen out of home ownership.
"Aspiring homeowners need to work out whether they are able and prepared to incur the short term additional costs of buying to put themselves in a position to benefit from the longer term gains and avoid the losses associated with lifetime renting."
However Miles Shipside, director of Rightmove, pointed to the other values which come with home ownership.
He said: "People still want to own the place in which they live, bring up their family and grow old."
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