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Money Expert - Diana Clement - Financial Planning, Career, Investing, Economy, Property - MSN NZ

Should you rent or buy property?

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It's a perennial question. We're brought up to believe in property ownership. Yet it can seem like a huge step to take and isn't it safer to keep renting?

The financial equation is quite simple. Are you spending more or less on rent than you would in your own home? If it's less, then you may want to stay put for the moment.

There are some "ifs". One is capital gains. Properties do go up in value over time building your wealth. Paying a mortgage could be vied as a way of saving.

Another "if" is if you're cut out for home ownership. You may fall into this category if you have big debts or you don't have a regular income. And are you going to stay put for a few years — or be able to let the property if you move away for work?

It's unlikely we're going to see property values start to go up for a couple of years at least — according to experts such as property market analyst Kieran Trass, who accurately called the last boom and bust.

What's more, rents are falling in more parts of New Zealand than they are rising. In the year to June 2009, data from bond information across New Zealand showed that 129 of 298 suburbs listed had zero or negative rent growth.

In order to get a mortgage you do need to be secure in your ability to earn an income. Having a partner can be a help, but it's not essential. I bought my first home as a single.

If you want to get on the housing ladder eventually, however, don't let these sorts of arguments put you off. It's all too easy to keep finding an excuse not to buy your first home. This happened to a friend of mine, who came up with spurious reasons for not buying his first property.

At the time in the early 1990s, we were both flatting in London and I was in the process of buying a property. The prices at the time were rock-bottom and it seemed like a no-brainer to me. He kept finding excuses and is now married with children and can no longer afford the much higher prices he would need to pay to own a home. Paying a mortgage can seem a struggle at first. However, it does get easier. As time goes on, your wages or salary should increase. At the same time, inflation erodes the value of the outstanding loan, making it cheaper and easier to pay off.

It's worth checking out a calculator. Buying may be cheaper than you think.

There is no reason why your first property shouldn't be a rental. If you're young it may pay to stay living in a shared flat and rent your property to others.

Investor Jodi Cottle did just that, buying her first rental flat when she was 19. Now 26 and with six rental properties behind her, she also lives in a rented shared flat in Auckland's Ellerslie. It costs her $130 a week compared to about $350 a week for a mortgage on a one-bedroom flat in the same area.

Cottle has published a book, The Young & Singles Guide to Property Investment, which is available to buy online. It's a good read for the young and singles and shows that going straight to property investing and bypassing home ownership may make sense.

Have your say: are you looking to buy your first home?

More property information

User comments
Renting is a mug's game. You'll never get ahead unless you buy your own place.
having bought a home a few times i really thought we were on the right track but now i've changed my mind All the banks are only too willing to give you a mortgage when they are flushed but you will soon be hit with a interest hike and there goes the increase you looked for in wages to keep up to date then there are the other pressures the kids need more and the costs of everyday life have gone up, but the banks still want more. Now the govt is looking for low cost housing , Please tell me how! The local govt has held land to force up the price and now a section is beyond most peoples reach Then the local govt has put a price for there permission to build and sign off ,Which I might add they do a very poor job of but they still charge and then you have to build the house.after paying the council and the land you will probably have a little change from 400.000 so now you can build your low cost home.What %kiwis owned 30 years ago and what % now
Honestly, would be great, for investment or owning. But I left the $100'000.00 deposit I need in my other pair of pants. Even if I didn't pay tax and somehow managed to go on without any expenses whatsoever, it would still take me more than a year to get it. How about a law that allows first-time buyers to buy with a 0-5% deposit, just to get us started? As it is now, the only people able to afford property are the ones who either don't need them or already have them.
I rent because by the time you add up all of the interest you have paid over all those years you will probably elimnate any capital gain in the future and some. Do you really ever own your home? Does the equity make you get into more debt? How did owning your home become the "must do" thing when you grow up? Is owning your own home the final standard that we use to measure maturity and success? It is all possibly a lie that we have created and now carry on for some unknown reason. Think, you struggle for years and then one day, 25 or 30 yrs later you own it outright. You'll probably sell at some stage because your family got bigger or whatever and then depending on the market at the time you may end up using your capital gain to meet the risen prices anyway? Think, your wasting money somewhere anyway, either to the bank in rediculous ammounts of interest, house maintenance, bad tenants etc. At least with renting, its cheap and I don't need to worry about fixing anything.
I bought my house own it for 20years now, I prefer buying cos then I can do whatever I want, paint the color I want and so worth paying the money for the Mortgage then giving it to away on Rent. I have a freehold Mortgage now with my family, but we did suffer to pay all these years but in the long run we are not losing out. Cos we have done a lot to our home and thinking of selling, we definitely will get a good profit on it. It pays to have good credit and buy then rent. Renting is like working, you have a Boss that checks on the house all the time but buying, you are your own Boss just have to work hard to pay off the Mortgage.Now adays we can DIY most things and it helps and add value to the house and not expensive.Id Buy anytime then Rent.
Until the average property price is back to 2.5 to 3 times average annual income (the way banks use to judged your ability to repay) they are too expensive, especially if you want to see some life, and not stare at four walls for 25years whilst you try to keep up the payments. About 4 years ago an economist said in an interview this calculation was important to sustain stable economies, as when houses cost more than this there isn’t enough money left in the economy to support the businesses that employ the people that are paying off their mortgages. He said this would naturally lead to a correction in prices as redundancies forced owners to sell. Sounds even more believable today!
One has to do the appropriate research for ones own situation. Bought my own home at 21 based on all the so called experts advice. 3 years later got restless wanted to travel. Sweet, so rented home out via "we will do the best job for you" real estate co . During 6 years of rental, my home got trashed 3 times. There had been 3 outstanding arrear procedings, rediculous repair bills and a history of tenants that should never have been givin a lease. At the end of the day I lost money. ( Yes it can happen). I am still a home owner today as this first property became the price of an education but I say this to the youth of today, take your time , renting can be fun, owning can be stressful and not always profitable and if renting the place out, be careful of mr realter and take landlord protection as horror tenants will always be on the rise.
As a Pasifika woman, owning my own house is great. However, it is the issue of deposit and also other financial payments e.g. rates(X2), water. I have been in NZ for 5 years only. We have our own house. Presently, we are caught up with the financial stress caused by the mortgage broker advertising something and it got out to be a fake. We explained honestly about our financial situation, trusting that negotiations will consider our needs. It turned out to be a cause of a misery. We are presently struggling to pay back arrears that was unintentionally made because we trusted this broker. Yes, you can criticise people who are not wise enough or have proper knowledge of the process of buying a house. But, there are people out there making money out of ignorant people who wants to own a house.
My wife and I have been together for 8 years and within that time we had gone from renting to having a mortgage back to renting to having another mortgage. The reasons why you rent vs buying are different to everyone, I quite often break it down to see that if had done the right thing. So i thought I would list the pros and cons. PROS TO OWNING it is your property which you can place your own mark on eg painting room, renovate - It is a type of savings that in years to come you can use the equity to go on holiday buy another property and so on - And last one major one is the pride you get in that it is your house whats that saying my house my castle. CONS TO OWNING what you can buy in mortgage repayments vs what this will get you in rent are two very different things e.g. I had gone from paying 290 a week in rent for a nice simple 3 bedroom house to paying 430 a week in mortgage repayments for the same type of house in the same area. sorry would to keep writing no room
I personally think renting being the best although I have dreamt to own my place, but given the complications and being declined for different reasons, I prefer to rent. The banks all have different criteria's and it just keeps making it hard for us. Some banks say we can afford it but then there is the issue of a deposit. I wish we could have the old systems from those days where there is no deposit but consider on the affordability.

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