The decision to rent or buy is always a big one. The traditional strategy of buying a first house and then moving up to the ideal home as your income and equity grows can be challenging. However, the alternative of renting indefinitely while you save to buy is becoming equally difficult because of escalating rents and increasing demands in New Zealand's larger cities; namely Auckland, Wellington and Christchurch.
If you’ve wondered whether you’re ahead by renting or better off buying, consider these statistics.
- The median net wealth of a renting household is generally much lower than a comparable household that owns their own home.
- Renters comprise over a third of the nation’s households but hold only a small percentage of the nation's wealth.
- New Zealanders who own their home are worth significantly more than renters.
So how do you take the step from renting to buying your first home?
- Approach the market with a sound five-year plan. Get into the market, pay down the mortgage, and establish equity in the home as a basis for long-term financial security and flexibility.
- Budget for extras. As well as a solid deposit, have money set aside to cover insurance, routine maintenance costs and to meet mortgage payments for several months if something goes wrong.
- Don’t worry about the market. Your focus should be on building a deposit while looking for the property that matches your lifestyle and budget.
- Compromise. Your perfect home is likely to be out of reach for now, so focus on hunting down a property that has solid real estate attributes - good location, off-street parking, security, quality finishes and proximity to restaurants and transport. Choose something that will suit your needs for the next five years or so while you build up equity and prepare for the next phase of home ownership.