Everyone in New Zealand dreams of the quarter-acre section, with a white picket fence, and a lovely backyard. But… Is everyone in New Zealand actually eager to pursue the home buying journey.
Since data was first recorded in this beautiful country in the 1920s, 60% of Kiwi’s are renters forever. The dream of buying a home and setting down roots might actually be dying out, as more and more younger folks simply put buying a home in the ‘too hard’ basket. We have moved from a plot of land and a house, to an apartment or a townhouse. More Kiwi’s are looking overseas for better pay and opportunities, or are leading the nomadic lifestyle.
First of all, let’s look at the basics.
Renting a home vs. buying a home
This is the time-old-tale of whether to start saving up everything you can to buy a home, or to rent.
Renting doesn’t allow you to build up any financial equity using property, but it does give you the ability to move around freely. The landlord should pay for maintenance, but you might end up paying more rent over time. There can be an exploration of different living spaces when you rent, but a landlord can sell the house.
There are very clear and defined pros and cons to renting a home vs. buying a home, and it looks like it ultimately depends on the goals of the individual or the family. Before making any decision, maybe we need to keep exploring.
Renting a Home Pros & Cons
- Can move out with minimal notice.
- No need to pay for maintenance.
- Can still make the home your own!
- There are a heap of laws out there to protect tenants/renters.
- Play around with different living spaces and styles.
- Can’t use property as financial equity.
- Limited ability to customise the space (paint the walls, etc.).
- Rent could increase over time.
- Landlord may sell or decide to stop renting.
- The housing policy update doesn’t help renters.
Buying a Home Pros & Cons
- Long-term wealth building
- Can use property as financial equity.
- Property may increase in value over time.
- Freedom to change space or renovate.
- High upfront costs
- Responsibility and costs for maintenance and management
- Less flexibility to move
High Deposits Needed
The median house price in New Zealand is steadily climbing, a latest report stated that house prices have gone up 24.3% from March 2020 to March 2021. Auckland’s median house price is reported at $1,120,000, which means for even a low deposit, you would need $112,000 in cash deposit. Some of us are lucky enough to have a huge chunk in our KiwiSaver savings, but even then… What if you don’t have KiwiSaver set up? Or can’t afford it? Or simply can’t afford to put any additional money aside for a house?
It would easily take 10, or even 15 years, to save up for the cash deposit of $100,000 without the help of KiwiSaver. If you wanted to see how long it would take to save for something, there are online calculators to help you figure out how much you need to save. Check The latest housing policy (23 March 2021) will also barely help first home buyers in this insane housing market. This means that without financially savvy parents, you would be basically saving your entire life to buy a house! Does that mean it’s doable? Well, it would depend on the goals of the individual. Most Kiwi’s love to spend their OE in London or Canada, or travel for a couple of months in replacement of their big overseas experience.
Is buying a home actually on the cards?
Maybe buying a house isn’t actually what you want to do! Renting offers way more freedom and flexibility, often resulting in only a months’ notice before departure. A first home isn’t always a dream home either, so renting a dream home can really help serve the lifestyle you want to lead. While we have been quite heavily restricted from COVID, some people have really preferred a nomadic lifestyle, travelling from country to country, or even living from a van.
Most people find comfort and joy in mobility and travelling. Setting down a long-term plan can simply be too difficult, especially when trying to decide how much to save up to buy a house. Buying a home is not always on the plan! Working long hours or travelling a heap can put a bit of a halt on buying a home, unless it’s an investment property, which has a completely different set of home-buying rules associated.
What are your long-term financial goals?
We always believe in putting everything into your long-term goals, because we think it’s the best way to achieve holistic wealth and wellness. Are you planning on staying in the same city or country for a long period of time? What is your financial situation at the moment? Can you afford new furniture and any moving costs?
While interest rates are low, we think that if it’s your goal to buy a house, you should absolutely jump on board. However, if this isn’t in the plans, then that is okay too! Rent isn’t “throwing away money”, it’s providing you a sheltered place to live, and for someone else to manage maintenance. Here at Money Empire, we believe in empowering people to make the right decision for their lives. Get in touch with one of our financial advisers to learn more.