New research in the UK has found that people locked out of home ownership will spend nearly £200,000 (€248,000) extra over a lifetime of renting rather than buying a house.
Barclays' calculations show that the costs of buying, paying the mortgage on and maintaining an average home valued at about £160,000 (€210,000) today will total £429,000 (€532,000) over 50 years. A tenant would typically pay £623,000 (€773,000) in rent for a similar property over that time.
The gap does not count the potential sale value of the purchased property. The high starting hurdles of deposits, stamp duty and legal fees mean many first-time buyers cannot take advantage.
While this research is UK based, there are fears of similar things happening hear with banks not lending as much as they have in the past with much stricter criteria in terms of meeting a suitable deposit amount.
Andy Gray, head of mortgages at Barclays, said: "The cost of stepping on or moving up the housing ladder can be a big barrier for many, but the long-term benefits hugely exceed the initial expense. Not only will you save money by becoming an owner-occupier, but you will also own a substantial asset once your mortgage is paid off, providing financial security for your old age."
Gray warned that those who ended up renting permanently would face the spectre of having to pay their landlord from their pension income, while owner-occupiers would enjoy minimal housing costs.
The researchers said their model was a conservative estimate, and did not factor in inflation above 2% nor house moves up the ladder, both of which exacerbate the gap.
It is estimated that the number of homeowners under 30 in the UK will fall from 2.4 million to 1.3 million by 2020.
To help you decide whether buying or renting is better value check out MyHome.ie’s Rent or Buy Calculator.
