5 October 2007The cost of renting a house in England and Wales is cheaper than the cost of buying it with a mortgage, say market analysts Hometrack.
Private rents in 2006 were two-thirds the cost of a 100% mortgage on a two- or three-bedroom house, for a young household on average incomes.
For many years, renting a home was thought to be just as expensive as buying one.
But that position has been changed by the rapid rise in house prices.
Professor Steve Wilcox of York University, who carried out the analysis, said that in many areas, people who were unable to buy a house could still afford to rent in the private sector.
"Not too long ago, there was little difference between the costs of buying and renting," he said.
"But while house prices tripled in the years since 1994, private sector rents only increased in line with earnings, and the costs of renting have as a result fallen relative to the costs of buying," he added.
The impact of the buy-to-let phenomenon on the property market is one reason why rents have been kept down, as a huge supply of properties to rent have come on the market in the past decade.
The report also found that nearly half of all households on the move were going into the private rented sector, which is now enjoying increased investment after a century of decline.
The income that first-time buyers need to get on the housing ladder has reached unprecedented levels, the report also says.
The Hometrack research shows that the ratio of house prices to income has nearly doubled in the past decade.
An average house in Britain now costs more than five times the average first-time buyer's income.
The average cost of a home in England and Wales is £176,300, according to Hometrack's figures.
This ratio of house price to income is far higher than at the peak of the last price boom in 1990.
Despite a long period of low interest rates, mortgage costs as a percentage of income - seen by some as a fairer measure of affordability - have also virtually doubled over the same period to more than 32%.
The figures show the most expensive place to buy is the London borough of Kensington and Chelsea, and the cheapest is the district of Wansbeck in Northumberland.
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