An area of the housing market which is often misunderstood is the relationship between renting a property and buying one, according to property expert Kate Faulkner.
While often it is said that renting is cheaper than buying, the data used to prove that statement is actually not providing a “real world” comparison, she says and explains:
“This is because the renting versus buying indices use an ‘average deposit’ that a first time buyer puts down as opposed to comparing the costs of renting versus someone buying with the minimum deposit of 5%.
“The Halifax index shows that “the average monthly costs associated with buying a three bedroom house in the UK for a first-time buyer was £666 in June 2015; 8% lower than the typical monthly rent paid on the same property type”.
“This is based on an average first time buyer having a mortgage of £141,160 and using the average Council of Mortgage Lender loan to value of 83% ie for buying to be cheaper than renting they buyer has to have found a deposit of £28,933.
“If the figures were based on a 5% deposit and a property purchase of £170,000, then renting would be on a par with buying and no deposit required, nor would the tenant have to pay for maintenance or buildings insurance, so the rent would be £750 per month and the mortgage payments on a par, making renting much cheaper than buying due to other associated costs.
“One solution immediately available for those who have a 5% deposit and wish to buy but can’t quite afford to buy at market prices is the option of Help to Buy. For example, in Bristol, someone who is currently renting could make buying possible and cheaper than renting in the short term by taking advantage of this government scheme or this one if buying a new build.
“For the full story including solutions for first time buyers and renters, read People need housing solutions, not scare stories.”
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