Should you rent or should you buy?

Sally Butcher owns hers. Richard Durand doesn't. A tale of two two-bedroom flats

Renting has become to property what cycling is to transport: a highly fashionable option praised by people who do not necessarily do it themselves. Car owners say how wonderful it is that people cycle to work; owner-occupiers tend to recommend renting - but from the comfort of their own homes. In an era of falling or stagnant house prices and uncertain jobs, renting makes a lot of sense for some people. It is simple and flexible - however, it does have certain drawbacks.

First, it is difficult to find a good property to rent. Many long-term rental properties are grotty. Those in good condition usually belong to individuals who let on a short-term basis, either because they are working away or because they cannot afford to sell. The tenant can be moved on at short notice.

The other major disadvantage of renting is the lack of freedom to make the place your own. Most rental properties are furnished and few landlords are willing to allow tenants freedom with a paintbrush.

Such constraints, however, might seem insignificant when anyone wondering whether or not to buy adds up the actual cost of purchasing a property. For a pounds 62,000 home (the average house price, according to the Halifax), stamp duty, solicitors' fees and mortgage indemnity insurance will be around pounds 1,179. And this figure does not include survey fees (which lenders often throw in free to first-time buyers) or removal costs.

Jane Pryor has experience of both owning and renting homes. She and her husband sold their two-bedroom flat in Stoke Newington, north-east London, and now, with two children, they rent a three-bedroom flat in Highgate, north London. She says the main advantage of renting is knowing exactly what your monthly costs are and remaining flexible about where to live and work.

The major disadvantages included finding a good flat and keeping it. "You have to take what is available at the time," she says. "You cannot be too choosy about the exact location or the configuration of rooms.

"Also, you don't know how many agents are handling the property. You have to see a place and say you will take it straight away, or you can lose it. We lost two or three places that way. It is a very stressful business."

Four months after moving into their last house the family was told the owner planned to sell it, so they had to leave fast. This time they have a 12-month contract with a six-month break clause on their side only. "There is an underlying insecurity," Jane says. "You never know quite what is going to happen."

In central London there are 10 applicants for every available flat. The shortage of supply is shifting the market in the landlord's favour. Penny Parr-Head, who runs Cluttons London Residential Lettings, says landlords are using this to pass on costs to tenants that they used to pay themselves. Water rates are a favourite, but some are also trying to pass on buildings insurance and service charges. "The more upmarket you go, the more it is a landlord's market," she says.

The owner

Sally Butcher bought her two-bedroom flat in Hammersmith, west London, in 1990 for pounds 95,000. Her mortgage of pounds 70,000 alone makes up three- fifths of her monthly outgoings. On the other hand, in 20 years' time, Sally will have the equivalent of a considerable lump of money. Her flat is now worth pounds 90,000. Even assuming a doomsday scenario of prices increasing at just over 1 per cent and inflation continuing at 3 per cent a year, it will be worth pounds 115,000. Sheis not worried about being tied. ""If I needed to move, I'd let the flat," she says. She would always want to own."You make your home your own."

The tenant

Richard Durand and hishis girlfriend. have just renewed their tenancy on a two-bedroom flat in Highgate, north London. The rent is pounds 650 a month. When the boiler went wrong, the bill for more than pounds 400 was paid by the landlord. For Richard, who is self-employed, being free of such unpredictable costs is a big bonus. However, he and his girlfriend would like to buy when they have saved enough for a deposit, regardless of what happens to house prices. "The mortgage would currently cost less than the monthly rental but I wouldn't consider taking out a 100 per cent mortgage."

How they compare

THE OWNER'S MONTHLY COSTS on a pounds 70,000 mortgage

Mortgage 441.36

Endowment 92.84

Insurance 27.33

Service Charge 60.00

Water Rates 9.00

Ground Rent 3.00

Total (without repairs) pounds 633.53

Total (average repairs) pounds 708.53

THE TENANT'S MONTHLY COSTS

Rent pounds 650 increasing to pounds 690 in August

Both owner and tenant pay their own council tax, electricity, gas and telephone bills