Author : Mary-Anne Bowring
It is not a shock to reveal overall housing costs are increasing notably. On average, there has been a 12% rise in rents this last year for new tenancies as the availability of good quality rental homes continues to decline. On the other side of the spectrum, homeowners are feeling the pinch of rising mortgage rates, and questioning whether they should own or rent a home.
Narrowing the gap between renting and ownership costs
Owning a home appears more affordable if one considers the costs of renting an equivalent property in the same area. The overall monthly cost of owning a home is 4% less than renting a comparable property. The present monthly difference on a national average gap is £42 if you consider the following costs for a normal three-bedroom property:
· The average monthly cost of ownership- £971
· The average monthly renting cost- £1,013
There is a significant decline in the gap in monthly costs witnessed in 2015 when it was £156. The figures refer to the national average and there may be variations depending on the locations and different types of accommodation becoming more popular such as Co-Living Units and HMO Units.
Merits and Concerns of Homeownership
Owning a home may prove to be a more cost-effective option in the longer run, though it involves significant upfront costs. People looking forward to staying in their own homes for a longer time should opt for mortgages. Every monthly installment for a home loan contributes to the homeownership, unlike monthly rent which is purely a contribution to the landlord's income. Monthly payments toward a home loan are an investment in real estate which is considered a safe and tangible investment. Homeowners enjoy complete control over their property. They can make home improvements whenever required. They are free to make structural changes or remodeling to the home subject to the usual consent.
Homeownership brings stability as the owner will not face eviction by the landlord. Homeowners can exercise better control over the monthly budget as the monthly installments do not change. The main disadvantage of buying a new home is upfront costs comprising mortgage fees, deposit, and stamp duty. The owner is responsible for the maintenance of the property. The maintenance costs can be higher for older properties.
Renting pros and cons
Renting is a suitable choice if you have limited initial funds. Tenants need not worry about maintenance costs as the landlord is responsible for these expenses. Renting is convenient for short-term living as most tenancy agreements would be up to 12-month terms. Rental accommodation enables you to access higher-end localities more easily as buying a house in a premium locality can be out of reach. Renting also facilitates budgeting as tenants need not consider overhead costs like maintenance and repairs.
The tenant can experience several disadvantages of renting, such as a lack of flexibility and control over property modifications. Most landlords may not allow pets on the property besides many restrictions. Landlord can abruptly increase the rent or ask the tenant to vacate the property. Tenants must leave after the lease period if the landlord decides to sell the property.
Renting emerges as a marginally cheaper option in the short term as homeowners have to arrange money for deposits, insurance, maintenance, fees, and surveys
Mary-Anne Bowring FIRPM FRICS FARLA FCABE Founder/Head of Asset Management
Strategic partnerships, holistic delivery/ opportunities, growth, value engineering, thought leadership
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