Renting vs. Buying Your First Home – What is Best?
As young Kiwis make their way toward independence, it can be hard to know when to move on from renting an apartment to buying a first home.
That caution is certainly warranted. As recently as two years ago, rates of home ownership were bottoming out in New Zealand, hitting a 66-year nadir.
But things are on the upturn again: As many as a quarter of home sales in 2018 were to first-time home buyers, rates higher than in any year since the Global Financial Crisis.
No matter the state of the economy, the decision whether to buy or keep renting is never easy, and always takes a great deal of contemplating many factors in one’s life.
So today, we’re talking about the pros and cons of renting vs. buying – and how you can make the decision that makes the most sense for your life.
Advantages of Buying
The biggest advantage of buying is that your payments build toward equity over time.
That is, while you’re still paying money every month, that money goes toward ownership of your home and a life with less financial worry.
You also get more creative freedom in terms of the appearance of the home and property – you don’t have to answer to a landlord, and you can decorate how you see fit.
In fact, DIY projects that beautify your home can also add to its value should you ever be looking to sell down the line.
On top of all that, you get more of a chance to be part of a community – putting down roots and getting to know your neighbors for many years.
All in all, buying can make for a more stable life, as renting always leaves the possibility of moving out within a year or two.
Disadvantages of Buying
With great equity comes great responsibility.
Put bluntly, while you have more freedom to do what you like when you own a home, you’re also responsible whenever anything goes wrong.
Maintenance issues are generally handled by your landlord when you rent – but you’re the lord of your own land as a homeowner.
Buying also carries a higher upfront cost. Besides your down payment, you’ll be paying for home inspections, all utilities, and the cost of furnishing an entire home rather than a small apartment.
Even so, when you buy, the value of your home is tied to the area around you– and you could lose money in the end if property values decline and you’re looking to sell down the line.
Advantages of Renting
The drawbacks that a first-time home buyer faces show that renting vs. buying really isn’t a clear-cut issue.
And renting isn’t that bad of a deal – you have fewer upfront costs to deal with, as well as less paperwork overall.
Often, the main upfront cost is a deposit that you can get back provided you take care of your space well enough.
Renters also enjoy more freedom to move as they please, since leases usually don’t extend for longer than a year at a time.
And of course, renters aren’t responsible for maintenance and repairs – it’s up to their landlord to keep the lights on and the water running.
Finally, there’s always a chance that some essential utilities – such as gas, electric, or internet – will be included at no extra cost on top of rent.
Disadvantages of Renting
Renting isn’t without its advantages – but the drawbacks keep the renting vs. buying decision a tough conundrum.
As a renter, you can build up your credit – thus improving interest rates you might get on a mortgage. However, you aren’t building any equity.
Put simply, your rent each month disappears forever rather than going toward ownership of the property, leaving you no closer to financial freedom.
And speaking of your rent each month, rent prices in New Zealand have been rising steadily, with the median rent increasing by $100 since the beginning of 2015.
You also have less stability and security in terms of your place to live as a renter. Your landlord could raise your rent substantially when your lease comes up, or they could sell the property entirely, leaving you with a different landlord or even out of an apartment entirely.
So while renting works just fine in the short term, its long-term drawbacks make for good motivation to become a first-time home buyer.
Renting vs. buying is a deeply personal question, and no one can answer it for you.
But at Able Spaces, we don’t think the choice needs to be binary between buying a traditional home and renting an apartment.
Our transportable homes make for an alternate option that gives you many of the advantages of both renting and buying – you can build toward equity with lower upfront costs, save on maintenance and utilities, and enjoy more freedom and mobility.
So while you consider whether the time is right to become a first time home buyer, be sure to consider all the housing options available to you.