Many want-to-be house owners are renting while they save for a deposit on their own house – but a recent report shows it would be almost as logical to buy a house while you save to rent.
According to the new Buying Vs Renting review from Halifax, someone who has been unable to get on the property ladder for the last five years would have paid almost £4,000 more to rent a typical home than if they had been able to buy the same house.
“There has been a substantial improvement in the affordability of owning compared to renting in recent years, which has been driven by the fact that monthly home ownership costs have fallen by a third (32%) since 2008.” Craig McKinlay, the Mortgage Director at Halifax, says:
“Buying will continue to be a more financially attractive option as the cost of owning a home remains stable. With greater availability of mortgages that require smaller deposits, the property ladder has also become even more accessible for those who can afford the monthly costs of owning but had previously not been able to save the necessary deposit.”
Five years ago tenants typically paid £15 a month less than people buying their own home, but now the situation has flipped. Renters now pay an average of £62 a month more and that’s with the cost of home owners’ maintenance and repairs included in the figures. The total gap over the last five years comes to £3,926 – almost four grand.
Unlike a lot of trends which only actually apply in London and the South East, this applies everywhere. The biggest difference is (of course) London where the average monthly cost of £1,275 for an owner compares to an average monthly rental price of £1,387; a saving of £112 a month - £1,338 a year.
However the second largest difference is found in the much cheaper North West where first-time buyers were paying £109 a month or £1,304 less than the typical private tenant in the region.
The smallest differences between the monthly cost of buying and renting are in the East Midlands (£6) and the South East (£15).
There are many causes for these high rents – a shortage of housing stock, BTL investors causing the price of housing to increase, and competition for rental properties. The rental sector is also set to be a big player in the upcoming election with Labour proposing longer tenancies and rent controls.
For those who live in rental properties, unable to save for the huge deposits required to move out, this report will make them feel that the dream of ownership is even further out of reach.