The cost of renting property in the UK private rented sector (PRS) is more expensive than actually buying property, according to Zoopla.
Renting works out at 13% more expensive than paying off a mortgage, although the gap between the two lifestyle choices has narrowed in recent months due to the rise in residential property values.
Zoopla say the main cause of the narrowing gap is that residential property prices have increased at a faster rate than rents during the past year.
The cost of renting a two-bedroom property in the UK Private Rented Sector is up by an average of £84 (GBP) per month compared to the cost of servicing an interest-only mortgage on the same property, which has risen by just £120 per year.
The average rental payment on a typical two-bedroom property is around £8,006 (GBP) per year, compared with £7,045 (GBP) per year to service a 5% mortgage.
Weaker residential property price growth in the North of England has meant that towns North of the Watford Gap dominate the list of places where it is cheaper to buy property than it is to rent from a private landlord.
- In York, it costs £3,326 (GBP) more to rent property than to buy property.
- In London, renting property is 6% cheaper than buying.
Zoopla spokesman Lawrence Hall said: “Buying property remains significantly more cost-effective than renting, but the gap is closing, although it is clear that large regional differences still exist.”
An estimated 1% only of first-time buyers are currently being granted interest-only loans but it is highly unlikely that first-time buyers will be on interest-only mortgages at 5%, although Moneyfacts report a number of best-buy mortgage deals for first-time buyers that do average around or under 5%.
However, renting property is a popular lifestyle choice for many tenants, who do not want to be tied to a mortgage and are quite happy to let someone else worry about repairs, maintenance and running costs associated with owning property.
Landlords are looking to expand their rental property portfolios to attempt to keep up with the strong demand for rental properties by tenants.
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