Princess Eugenie will soon be neighbours with fellow royals, after deciding to rent a three-bedroom cottage in the grounds of Kensington Palace. The West London Palace is already home to Prince William and Kate Middleton, otherwise known as the Duke and Duchess of Cambridge, as well as Prince Harry.

But it appears room will be made Eugenie to live in a three-bedroom Ivy Cottage from next year, until recently the home of the deputy head of the palace's property section.

The move will see the 26-year-old vacate the four-bedroom taxpayer-funded St James's Palace apartment she currently shares with her sister, Princess Beatrice, claim The Telegraph.

Both sisters each enjoy a net worth of £3m ($3.9m), on top of royal luxuries. However, in a surprise move, a source told the Daily Mail that Eugenie will be paying "market rent" on her new home, but stopped short of revealing whether public money would be spent on the cottage itself.

"The matter is still under discussion, but it is likely that she will take over the property in the next few months," claimed the insider.

Eugenie's arrival will continue a remarkable turnaround in the popularity of the Palace, chosen by Prince William as the ideal place to raise his two children Prince George, three, and Prince Charlotte, one, following his marriage to the Duchess of Cambridge, Kate Middleton in 2011.

The property had previously been seen as an unlucky royal home, described by Princess Diana as "more of a prison than a palace".

However, William clearly held fonder childhood memories there, much preferring it to St James's Palace, the present home of Eugenie, which he once described as "rather gloomy".

Eugenie is the second daughter of Prince Andrew, Duke of York and Sarah, Duchess of York. She is seventh in the line of succession to the throne, and the second female.