Wairoa's typical first-home repayment is only 79 percent of the cost of a median rental. File photo. Photo: Pool / NZME
Buying a house is about twice as expensive as renting in New Zealand as a whole, but there are still places where it is cheaper to own your home than rent it, new data shows.
Infometrics chief forecaster Gareth Kiernan has run the numbers on how the average rent around the country compares to the cost of buying a first home, based on a median-priced house with a 20 percent deposit over a 30-year term, and a one-year fixed home loan rate.
That data shows that in areas such as Wairoa, Kawerau, Ruapehu, Buller and Tararua, it is cheaper to service a mortgage than to pay typical rent.
Wairoa's typical first-home repayment is only 79 percent of the cost of a median rental, as an average of the past 12 months. Kawerau is at 82 percent.
Kiernan said the problem for first-home buyers would be making sure there was work for them in those areas.
Photo: Supplied
"You've got to have a job and be confident that job will continue - whereas a landlord needs less confidence in any given individual's prospects and only that there are going to be some jobs and therefore people living in the town who need rental accommodation.
"From a potential first-home buyer's point of view, some roles and skills are relatively transferable, but even then it's going to be easier and more secure moving from Auckland to Rotorua if I'm a teacher, policeman, tradesperson, than it will be moving from Auckland to Kawerau."
Dunedin is in sixth place, with typical buying costs at 101 percent of the average rental. Kiernan said that could reflect a rental stock with larger-than-average numbers of bedrooms because of the student population.
The more expensive areas to buy compared to rent are Queenstown-Lakes, Taupo, Hastings, Auckland and Central Otago. In Queenstown, it is three times as expensive to buy a median house as it is to pay rent.
At a national level, the cost of buying sits at 219 percent of the cost of renting.
Auckland is at 235 percent.
Kiernan said mortgage payments were not massively above the long-term average compared to rent at the moment, possibly due to the strong rent growth seen last year due to rising immigration.
"It wasn't as elevated now as I thought it might have been... I think [rising rent] is an aspect of it, we've had reasonable rent price inflation through 2023, it wasn't massive but it was faster than normal. There's also - if you compare things to late 2020 early 2021 you've also had the dynamic where, yes, interest rates have been rising making mortgage repayments higher but you have also had house prices come back 15 or 20 percent as well which has mitigated that rise."
The cost of buying compared to renting was highest at a national level before the global financial crisis, when it hit three times.
He said through this period both interest rates and house prices were trending upwards, which was a double-whammy.
In many parts of the country - including Whangarei, Thames-Coromandel, Waitomo, Rotorua, Gisborne and Rangitikei - the cost of owning drifted below renting through 2020 as interest rates hit historic lows. In Buller, in April 2020 the cost of owning was 19 percent of the cost of renting.
Kiernan said it made sense that it cost more to service a mortgage, in many places.
"If you own your own home, if you're paying off that mortgage over the next 25 or 30 years you're kind of implicitly also paying for being mortgage-free beyond that. If you think about living in a house you get a stream of benefits from... you're still getting those benefits even after you've paid off the mortgage. It's almost like you frontload some of those costs. I'm not surprised by New Zealand's numbers that it's cheaper to rent than it is to buy a house."
Kiernan said Infometrics had updated its forecast for house prices, and for them to be flat for a long period.
Top five places where buying is cheaper than renting (cost of owning as percentage of rent):
- Wairoa - 79 percent
- Kawerau - 82 percent
- Ruapehu - 88 percent
- Buller - 94 percent
- Tararua - 98 percent
