Kiwis love a good debate—rugby, pavlova, and whether it’s smarter to buy a house or keep renting. With house prices still high and rents climbing, let’s break it down in plain English. No jargon, just practical insights to help you decide what might work best over the next 20 years.
The Big Question: Buy a House or Keep Renting?
Imagine you’re 40 years old with $160,000 in savings. Here’s the choice:
• Option 1: Buy a house for $800,000 in Palmerston North.
• Option 2: Keep renting at $700 per week and invest your savings instead.
Let’s see where each path could lead you in 20 years.
Option 1: Buying a House
Costs
• Deposit: $160,000 (20% of $800,000).
• Mortgage: $640,000 over 20 years at 6.5% interest, about $4,700 per month.
• Other Expenses:
• Rates: $3,000/year.
• Insurance: $1,500/year.
• Repairs & maintenance: $8,000/year.
Outcome After 20 Years
• You’ll own a paid-off house.
• If the property value grows at 3% per year, your $800,000 house could be worth $1.44 million.
• After deducting selling fees (e.g., real estate agents), you’d pocket around $1.37 million.
Catch:
• Over 20 years, you’ll spend approximately $1.46 million on your mortgage and other costs.
• Net result: You’re down $90,000 overall, but you own a home outright.
Option 2: Renting + Investing
Costs
• Rent: Starts at $700/week ($36,000/year) and rises by 3% annually. By Year 20, rent would be about $1,000/week.
• Total Rent Over 20 Years: ~$1.03 million.
Investments
• Savings: Start with your $160,000 and invest the extra cash you save by not paying a mortgage.
• Example: Renting might save you $2,000/month initially compared to buying, which you could invest.
Potential Returns
• Assuming a 7% average annual return (e.g., shares or ETFs), your investments could grow to $1.83 million.
• Subtract the $1.03 million spent on rent, and you’re left with $800,000 profit.
Buying vs. Renting: Pros & Cons
Buying | Renting |
✅ Own a home outright in 20 years | ✅ No maintenance headaches |
✅ Stability (no rent increases) | ✅ Flexibility to move for work/life |
❌ High upfront costs + repairs | ❌ Rent keeps rising |
❌ House value might grow slowly | ❌ Requires discipline to invest savings |
What Matters Most?
1. House Prices vs. Investments
• If house prices grow faster than investments, buying wins.
• Historically, NZ houses grew ~6-7% annually, but recent trends suggest 2-3%.
• Investments like shares often average ~7-8% per year.
2. Your Lifestyle
• Buying suits you if: You want to settle down, hate moving, or enjoy DIY projects.
• Renting suits you if: You value flexibility, plan to travel, or dislike home maintenance.
3. The “Kiwi Dream” Factor
Owning a home is deeply ingrained in NZ culture, but it’s not the only path to building wealth.
What If…?
• House Prices Crash?
Buyers risk losing equity, while renters’ diversified investments might also drop but can recover.
• Interest Rates Rise?
Buyers face higher mortgage payments (if on a floating rate). Renters continue investing.
• You Get a Big Pay Rise?
Buyers can pay off their mortgage faster. Renters can invest even more.
The Bottom Line
Buying is like a savings account you live in. You’ll own a home but lock up your cash.
Renting is betting on yourself. If you invest wisely, you could end up richer—but it’s riskier.
Still Stuck? Ask Yourself:
• Do I want to stay put for 10+ years? → Buy.
• Do I value flexibility? → Rent.
• Will I actually invest the extra cash? → Be honest with yourself!
Final Thought
There’s no one-size-fits-all answer. For some, nothing beats owning a home. For others, renting offers freedom and a shot at growing wealth. Whatever you choose, start now—time is your best mate when building a nest egg.
What do you think?
Tags: Buying a house NZ, Renting in New Zealand, NZ housing market, First-home buyer tips, Investing for Kiwis.
Disclaimer: This is general advice only. Speak to a financial advisor for a tailored plan. Numbers are estimates, and assumptions (e.g., 3% house price growth, 7% investment returns) may vary.
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