PHOTO: NZ housing. RENT or BUY?
As house prices continue to rise, many New Zealanders are asking the question “is it better to buy or rent?”. This isn’t limited to millennials either, with one in three first-home buyers significantly worried about the amount of debt they accrue as they take a step onto the property ladder. There’s so much rhetoric around whether it is better to buy or rent, and it can be difficult to crunch the numbers and work out which is best for you. While owning your own free-standing home has been part of the ‘Australian dream’ for decades, 87% of all Australians surveyed by Mortgage Choice believe this dream is becoming more difficult to achieve.
According to the latest research by the Tenancy Bond Service, the current median rent is $460 per week. Comparatively, the weekly mortgage repayments on a median priced in property in New Zealand is between $580 and $680 according to Interest.co.nz. However, these repayments are still considered ‘affordable’ (anything less than 40% of the household’s take home pay) for the majority of New Zealand couples and young families. This suggests the issue isn’t with long-term affordability but saving up a deposit.
Benefits of renting a property
Renting for life may not necessarily be a bad thing — renters don’t pay rates, maintenance fees, body corporate fees or home insurance, and there’s no upfront stamp duty to pay either. In the short term, renting is often the cheaper option with more money ending up in your pocket month-to-month when compared with paying off a mortgage. Renters also have the flexibility to live in a suburb they may not be able to afford to buy in and have greater flexibility with house size and location, relishing in the ability to move with ease.
Depending on where you’re looking to rent, securing a lease can be just as competitive as buying a house. RE/MAX agents are available to guide you through the renting process — check out our top tips for renting with RE/MAX.
Benefits of buying a property
On the other side of the coin, taking the plunge and purchasing property is generally accepted as an easier and more reliable way toward long-term financial gain, with the majority of properties in New Zealand gaining value above inflation rates over a decade or longer. Although a large part of your monthly repayments may be going towards paying off interest, a significant part is paying off your loan and therefore building equity in your own property rather than your landlord’s. Living in your own home also means you’re also not limited by landlord restrictions. You can paint, renovate, landscape and put as many hooks in the walls as you want without worrying about breaching a rental agreement.
Even with stamp duty fees, interest payments and all other additional expenses that go with owning a property, it’s still generally considered to be more favourable than renting in the long term. It’s a stable investment that maximises your return thanks to a little thing known as capital gains. While renters can still build a significant investment portfolio by investing the money they would have spent on a mortgage into shares, it doesn’t often work out that way. Making repayments on your property is a way to enforce your savings, causing you to ‘save’ at a rate that’s likely higher than if you were renting.
If you’re looking to buy instead of rent, and get a foot onto the property ladder, RE/MAX sales associates can guide you through every step of the process of buying a home. Learn more about buying with RE/MAX.
Get expert advice
No matter which option you decide on, housing will be the biggest ongoing financial cost throughout your life. With many pros and cons in both camps, what it all boils down to is making the right decision for you. When you’re asking yourself the question, “is it better to buy or rent” it’s crucial to enlist expert advice and guidance to help you make this decision. Contact your local agent today!