Renting now cheaper than buying
The cost of renting a house in England and Wales is cheaper than the cost of buying it with a mortgage, say market analysts Hometrack. Private rents in 2006 were two-thirds the cost of a 100% mortgage on a two- or three-bedroom house, for a young household on average incomes. For many years, renting a home was thought to be just as expensive as buying one, but that position has been changed by the rapid rise in house prices.
Professor Steve Wilcox of York University, who carried out the analysis, said: “The cost of private renting is now much cheaper than the cost of buying, and as far as the supply of affordable housing is concerned the rented sector is an important part of the solution. “Not too long ago, there was little difference between the costs of buying and renting. But while house prices tripled in the years since 1994, private sector rents only increased in line with earnings, and the costs of renting have as a result fallen relative to the costs of buying.”
The impact of the buy-to-let phenomenon on the property market is one reason why rents have been kept down, as a huge supply of properties to rent have come on the market in the past decade. The report also found that nearly half of all households on the move were going into the private rented sector, which is now enjoying increased investment after a century of decline.
The income that first-time buyers need to get on the housing ladder has reached unprecedented levels, the report also said. The Hometrack research shows that the ratio of house prices to income has nearly doubled in the past decade.
The figures show the most expensive place to buy is the London borough of Kensington and Chelsea, and the cheapest is the district of Wansbeck in Northumberland.