Is the timing right to buy or rent?
In the ?rent versus buyer equation?, there are only three areas in the South Island where it is cheaper to own a house than rent. ?In the rest of the country it?s cheaper to rent,? says Tommy?s Lower Hutt branch general manager Mark Coffey. He says the difference is that over time people with mortgages will own a house as opposed to ?having paid to live in one,? he says. Mr Coffey is staggered at the number of couples that rent the same property for 10-15 years when they could now be homeowners. ?You are never able to catch up on the capital growth of a property if you pay rent. ?Week by week it might be a cheaper option, but that is all money gone, and if you pay off a mortgage you have a place in the bag at the end of it,? he says. Mr Coffey admits being bias because he works ?in the business of selling houses?, but maintains that if someone saved all available earnings they would be hard pressed to make more than they would by investing in property. ?Everyone talks of our love affair with owning a home, and that really depends on if it suits your lifestyle because it?s not going to work if you sell every two years,? he says. If a prospective homebuyer was looking to purchase a $350 thousand dollar property in Lower Hutt and have put down $50,000 on the mortgage, they would be paying roughly $400 a week in repayments, as well as rates, insurance and maintenance costs. Renting a three-bedroom house in Lower Hutt would cost around $400 per week, and the property owner would cover most other costs, Mr Coffey says. The trend is replicated throughout the region with the average price for renting a three-bedroom house in Broadmeadows, Johnsonville and Newland around $400 per week. The decision to buy or rent is not driven solely driven by money, as overseas studies point to several benefits of home ownership, including better outcomes for children who profit from the stability of living in one place. Despite changing affordability of houses, prospective homebuyers have to consider their immediate futures and the prospect of being tied to one area. Paremata Professionals sales consultant George Albrecht says the situation is ?tricky? because of the range of factors people need to take into consideration. ?As the banks wind up the criteria on loans, the bottom end of the market is not being brought up,? says Mr Albrecht. He says not many people are looking for investment properties in the area, because it is harder to find tenants, but in areas where it is easier to find tenants managing the property can be more challenging. Infometrics New Zealand Housing Outlook study for August shows rental growth in Wellington over the year to June had eased to 2.5 percent ? even though rental growth in Wellington was at a four-year low, this result was still the strongest in the country. ?With poor housing affordability and an uncertain outlook for employment and the economy, demand for rental accommodation appears to have held up. ?Low mortgage rates will fuel investor demand into the second half of this year, but the renewed lift in prices will reduce the number of available bargains and see demand ebb again heading into 2010,? says the study.
