Renters 'could end up $700,000 better off' than first-home buyers, economist calculates
First-home buyers have been taking advantage of flat house prices and strong investment markets.
An Auckland first-time home buyer could end up over $700,000 better off in 30 years if they rent instead, according to economist Simplicity chief Shamubeel Eaqub. Home ownership has been appealing due to strong investment markets and flat house prices, allowing buyers to accumulate significant amounts in KiwiSaver for a deposit.
However, property value growth is expected to slow, making the decision between buying and renting more complex. Eaqub's calculations show that a $900,000 house purchase, with a 10% deposit, 3% annual house price growth, and 5% mortgage rate, could result in a $2.1 million wealth after 30 years. Meanwhile, a renter paying $619 weekly rent, with a 3.2% annual rent increase, could invest the difference in a managed fund with a 5.4% net after-tax return and expect a $2.83 million investment fund at the same time.
The renter would be $724,530 better off, but would need to continue paying rent in retirement. Eaqub emphasizes that both home ownership and renting have costs and benefits, and people should weigh these factors based on their circumstances.
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