A renter will be nearly £900,000 poorer over the course of three decades compared with a homeowner, according to new research.
Analysis produced exclusively for The i Paper reveals both the true cost of renting and the financial disadvantage it can cause.
Fewer people are homeowners compared to previous generations, as a result of rising house prices, with Labour pledging to turn this around by building thousands more affordable homes.
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.
It also finds that homeowners pay just over £20,000 more than renters (£1.03 million compared with £911,000) which includes the cost of the deposit, mortgage interest, repairs and insurance.
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).
square SAVING AND BANKING The Bank of England holds interest rates - what it means for your money
Read More
Savills used an example of a homeowner buying a two-bed home at the average UK house price, then selling that after seven years and upgrading to a three-bed home, before finally moving to a four-bed home after another seven years.
It assumed the homeowner would pay off their mortgage over 30 years, with an initial house deposit of 22 per cent.
At today’s average house price of £271,000, based on data from the Office for National Statistics, that would require a deposit of £59,620.
Savills also assumed the cost of mortgage debt starts at 4.32 per cent but falls to 3.82 per cent in year seven.
It then compared this with a renter following the same pattern of renting a typical two-bed home, before moving to a three-bed and then a four-bed home after seven-year intervals.
Its analysis found that a homeowner would pay less than a renter while living in a two-bed and three-bed home.
However, the cost of paying a mortgage overtakes the cost of renting when you trade up to a four-bed home.
Source: SavillsLucian 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.
“Our analysis shows that the real stretch is the move from a three-bed to a four-bed, with home ownership costs moving back above the costs of renting for a period.
“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.”
For those who do go on to buy a four-bed home, it is repair and insurance bills that take the cost of homeownership above renting.
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.
Meanwhile, a renter would not have built up any property wealth and would have to keep paying rent into retirement.
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.
“But of course, by this point, the homeowner will have built up significant housing wealth, while the perpetual private renter won’t, still being exposed to housing costs in their later years.”
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.
However, that assumes house prices rise over the period you own your home.
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.
House prices have faltered over the past few months due to a surplus of homes on the market this year compared with last year.
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.
Read More Details
Finally We wish PressBee provided you with enough information of ( Renters spend almost £900k more than homeowners over 30 years )
Also on site :
- Numbrix 9 - June 19
- Iconic Sitcom Actress, 67, Stuns With Ageless Appearance 20 Years After Show Ended
- Devi Khadka: The woman leading the fight against wartime sexual violence