Analysis produced exclusively for The i Paper reveals both the true cost of renting and the financial disadvantage it can cause.
Data, produced by the estate agency Savills, compares how much a typical home owner is likely to pay over the next 30 years compares with someone who rents. It reveals that a typical renter will pay £889,189 more, and assumes the home owner will sell their property over this time period.
However, this extra cost is likely to be offset by money made on selling the properties, which is likely to be £1,010,923. This assumes average costs of a home now, and annual house-price growth of 2.5 per cent for the next 30 years (as well as rents, repairs and insurance costs all increasing by this amount).
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It assumed the homeowner would pay off their mortgage over 30 years, with an initial house deposit of 22 per cent.
Savills also assumed the cost of mortgage debt starts at 4.32 per cent but falls to 3.82 per cent in year seven.
Its analysis found that a homeowner would pay less than a renter while living in a two-bed and three-bed home.
Source: Savills
Lucian Cook, director of residential research at Savills, said homeowners often stop at a three-bed home and opt to extend it instead of buying a larger house to save on these extra costs.
“That is one of the reasons many don’t make that move, even though it provides more affluent households with the opportunity to build up a bigger pool housing wealth in due course.”
But these extra costs are then offset by the sale proceeds from the houses, and the homeowner will have no more regular costs to pay once they are mortgage-free.
Source: Savills
“By the end of year 30, the real difference in total housing costs incurred are the homeowners’ repairs and insurance costs, with the cost of putting down a deposit and serving a mortgage remarkably similar to total rental costs over 30 years,” explained Mr Cook.
According to Savills’ analysis, homeowners can expect an average annual return on their property of about 11 per cent over 30 years compared with renters.
Those buying and renting in London also face much higher costs, with final sale proceeds at £2,241,251, leaving a net cost of home ownership at £114,590.
Recent data from Zoopla shows sellers are agreeing sales at £16,000 below their asking price on average.
Collecting a house deposit is also one of the overriding constraints on potential home owners, with the average first-time buyer deposit still standing at 90 per cent of their income.
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