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Should you rent or buy?
Kiwis love owning their own homes – there’s no two ways about it. Homeownership brings intangible benefits like stability, pride and a sense of identity. But what Mum and Dad did, isn’t necessarily the immediate choice for a new generation of young Kiwis who want freedom, flexibility, and no ties. In this blog, we look at the pros and cons of buying over renting.
- Investment: Homeownership is a way to build equity – eventually. For the first few years of your mortgage, you are only paying interest on your loan. It can take a while to actually build up equity in a property. None the less, property prices have doubled in just about every part of the country over the last decade. So, while returns aren’t guaranteed, history does have a habit of repeating itself.
- A bit of you: Owning your home allows you to live just the way you like. Your colours, your furnishings, your style. Plus, you can knock down walls, push up and out – it’s your home to play with.
- Community: Putting roots down helps you become part of the community, engage with your neighbourhood, and the local school.
- No permission: Besides getting council permits (and under some circumstances your neighbours), you can do what you like. Put in that swimming pool, build that man-shed.
- Further borrowing: Once you've owned a home for a while and have built up some equity, you might have a further opportunity to use that equity to borrow more. This means you could renovate or upsize your home, buy an investment property, or even a holiday bach.
- Legacy: Your home isn’t just where you raise your children, it’s something you can hand over to your children in the future. Many homes become the gathering points for extended families and there is often an important connection and desire to keep a property in the family for that reason.
- Pet friendly: If you’ve always wanted a dog or a menagerie, you can with your own home. There are no landlord rules to dampen your doggie dreams.
- Forced saving: Not everyone is good with money. Having a mortgage where a good chunk of your salary disappears to every month is, to a degree, a bit like forced saving. You soon learn to live without that money and tailor your life accordingly.
- Extra outgoings: Even if your current rent is similar to your new home mortgage payments, there are plenty of extra costs when buying. Maintenance, home and contents insurance, rates, gardening. It can all add up to quite a sum which may make those dinners out, fewer and far between.
- Less flexible: A home purchase isn’t a short-term investment. Upping sticks after a few years can be an expensive exercise. So, if you want to wander the world in the next few years, buying may not be right until you’re ready to settle down.
- Time is precious: Some homes require a lot of time and maintenance, particularly older styles. This can become a burden and take the joy out of homeownership unless you are passionate about DIY.
- Fixed costs: While rents have been rising, new government tenancy rules mean rents can’t be raised every year. So, renters know what their outgoings are every month and can budget accordingly.
- Freedom: If you don’t like the place, the neighbourhood or the neighbours, you can move pretty easily just by handing in your notice.
- No maintenance: All the rates and repairs (as long as you didn't cause them) to your rental are the landlord’s responsibility, so you don’t have to spend your weekends' painting or worrying about the cost of repairs to the roof.
- More disposable: Depending on your circumstances, renting can leave you with more disposable income allowing you to go out more or put money in other investments like KiwiSaver or shares.
- While rents can be predictable, landlords are often not so. They can decide to sell up overnight or Increase the rent beyond your means.
- Few changes: Some landlords don’t mind if you make small cosmetic changes to a property. But most times they are reluctant to allow you to paint a feature wall or build a wardrobe. If you do, you may have to re-instate the place back to its original condition when you leave at your own cost.
- Slow repairs: While many landlords are good at getting repairs done swiftly, others like to take their time. So, you can wait months to get a leaking gutter fixed or a broken window replaced.
- No equity: Because you don’t own your property, it's often harder to borrow for other purchases such as a new car. Banks always prefer to lend money to people with some sort of equity they can liquidate if necessary.
- Not pet friendly: Many landlords don’t allow pets, so if you’re an animal lover this could burst your bubble.
- Room for toys: Not all rentals have garages or safe places to store your bikes and boats – which could restrict your playtime.
Overall, the choice between buying and renting comes down to some very personal and often intangible things. Sometimes it’s about your vision for life – other times it’s about personal comfort. It’s never all about money and shouldn’t be. There’s always a cost to putting a roof over your head and whether it’s better going into a bank’s pocket or a landlord’s is a hotly debated topic – and ultimately something only you can decide.