There’s an old saying that you should often take the advice of others with “a grain of salt”. Since I’ve started this gig, I’ve read so much advice on house buying I’m considering going to the doctor for some blood thinners.
There is plenty of information online stating why one should rent instead of buy. There’s even more out there explaining why the opposite is true. It won’t surprise you to know that here at Open2view we are, indeed, quite fond of the concept of home ownership. There are very good reasons, both financial and holistic, for buying over renting.
It’s true that our housing market shares many traits with the Auckland Blues: with a hiss and a roar they climbed to great heights till the bubble burst, confidence dissipated, and they descended into a state of utter confusion and misery. There are of course some key differences: the property market is displaying signs of life, and people are still showing up to Open Homes.
Playing conditions right now are ideal for first-home buyers. Interest.co.nz released their latest Rent-or-Buy Report last week. This report calculates the “percentage of after tax income needed to service the mortgage of a lower quartile house” compared to renting an average three bedroom house.
The gap between buying and renting was huge a few years ago when the property market was at its peak. Not anymore. In March it took 25.6% of household (that’s two people’s) take-home income to pay the mortgage, and other costs, on a lower quartile house. Meanwhile it took 24% to pay the median rent on a three bedroom dwelling. That is, states the report, a differential of just 1.5%. I’m pretty sure it’s actually 1.6%, but anyway – point is, the gap is now almost negligible. In dollar terms, you’re looking at $361.54 on average per week to cover your house costs versus $340 a week in rent.
On top of that, floating mortgage rates are at a 47-year low and will stay low with the Official Cash Rate not going up anytime soon. So, if you have the deposit saved, why wouldn’t ya?
“Because it’s not all about flaming money, ya drongo” might be the reply from some. Fair enough. So I sat down and listed some other advantages of buying. Then I cheated and consulted this excellent article on the subject by research group Canstar.
Together we came up with these extra, kind-of-financial-but-also-not-really, reasons to buy:
- You’re not at the mercy of a landlord. Most are good of course but, if you own your home, you aren’t going to wake up to a letter informing you your rent’s going up or that the house is for sale.
- Every dollar you pay toward your mortgage is paying off your asset, not someone else’s. Leave that to someone else.
- A house is an asset you can borrow against, leave to your children, or convert into cash. Do any of that with a rental and your landlord won’t be impressed.
- Ever tried jumping straight from the ground to the top of a ladder? No? Good, because ladders are for climbing. Once you own your first home it becomes much easier to reach a better one.
- House values, over time, increase. So, usually, does rent.
- Above all, owning your own home is empowering. It’s yours. And there is so much more you can do with your own place, over a rental, to make a house your home.
On financial grounds now is a great time to buy. And if you can’t right now, and the market changes in the meantime, don’t let that stop you – there are plenty of other reasons to enter the property market once you’re ready. Even in the ‘lower end’ of the market there are some great buys awaiting your attention.
Can you think of any reasons we’ve missed? Feel free to add them below or on our Facebook page!