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Rents have risen 3.7% over the past year but rising house prices mean the cost of renting relative to buying has fallen.

These are the findings from the latest Countrywide Residential Monthly Lettings Index.

It found that in 2014, the average tenant pays 93p in rent for every £1 spent on mortgage repayments by a homeowner able to put down a 10% deposit. This is a decrease of 3p from 96p 12 months ago.

While the largest rises in house prices have been in London and the South East, house prices rose more quickly than rents over the past 12 months across 87% of the country. The 13% of areas where the cost of renting rose relative to buying were almost exclusively parts of South Wales and the North East England, where it has been house prices rather than rents that have fallen. Rents in Wales and the North East grew 4.6% and 2% respectively over the past 12 months, whilst house prices continued to fall.

It has been in London where the cost of renting relative to buying fell most quickly. The average tenant spends just 86p on rent, down from 93p a year ago, for every £1 a homeowner spent on a mortgage. It is now cheaper to rent than it is to buy in 30 out of the 33 London boroughs, up from 25 in 2013. It has been in the outer eastern Boroughs were the dynamics have changed. In the past 12 months, it became cheaper to rent than buy in Croydon, Enfield, Hackney, Hillingdon and Tower Hamlets.

Rental growth is showing signs of picking up with average rents in the UK increasing 3.7% over the past 12 months. Scotland has seen the biggest increase in rents, up 13.4% year-on-year, driven by the very strong performance of a number of large cities.

However, in the early part of 2014, growth in average rents in the UK remains below 2013 levels, with signs that some of the demand is being transferred from the rental to the sales market. The number of registered applicants was 20% higher in April 2014 compared to 12 months ago, most strongly in areas of outer London and parts of Northern England. The number of referrals between the rental and sales divisions grew 8%; a sign that would-be first time buyers are looking to get onto the housing ladder.

Nick Dunning, group commercial director at Countrywide plc, said: Home ownership has long been part of the British psyche. However, for many households, particularly in the short to medium term, home ownership doesn't always make sense financially or otherwise. As house prices rise, renting increasingly allows people to live in areas they would otherwise be unable to afford to buy. In more expensive cities, such as London, the cost of renting in more central areas can be just half the cost of buying. The result is that in the most central areas of London, and many other global cities, over half the population now rent.

Deciding whether to buy or rent is rarely straightforward and usually takes into account a range of factors. While in the long term capital repayments will mean that homeowners build up equity in their property, in the shorter term, purchase costs such as stamp duty and the ongoing costs of maintenance, can mean the cost of homeownership is considerably higher than renting. In the first year of ownership, taking into account all associated costs, a buyer with a 10% deposit will pay 35% more (£13,600 vs. £10,050) than someone renting the equivalent property.

While homeowners can benefit from increases to the value of their home over the long term, homeownership itself doesn't automatically equate to large financial returns. The money saved by renting can be invested in other ways. The reality is that tenants, far from being priced out of the market in the long term, have benefitted from the flexibility this growing and increasingly professional sector offers.

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