Rent or Buy? any advice?

[a02arifa]

Hi all,
We are new to this forum and this is our first post. In January 2011 we are moving to auckland as part of internal trasnfer within my company.

Renting would be the obvious choise but after looking at the prices and what you get it made me think twice about maybe buying a property instead. We are going to stay for a minimum of 2 years and the renting would cost us about 500/week -> 25000/year -> 50000 for 2 years.

Now we are thinking instead of throwing 50000 away, why not buy a property (and the furniture you like) and sell it when moving back. This way we can cut our losses. Does this make sense in Auckland?

We would appreciate any feedback or advise regarding this topic. Maybe there are fees, property taxes and other hidden charges that we are not aware of that makes this not feasable.

Also is it easy to get a mortgage if you have just moved there? Do you need credit scores like in some countries? I will be in the 100000+ salary range and have been working for the same company for the past 5 years with steady income that can be seen in my bank account. Does this matter or does it have to be seen in a NZ bank account?

Thanks in advance

[JandM]

Hello and welcome.

You'll get some comments from those in NZ later on, I'm sure.

[nickydwuk]

When we moved to NZ we bought a house before we arrived as our intention was to live there for good. To cut a long story short we decided to return to the UK within a year of moving. Our return was delayed as we had to sell the house and the market was poor. We both said that we would have been better to rent to begin with. That way if we wanted to move to a different part of NZ we could just up sticks and go or if we wanted to return to UK we could quite quickly.

Although renting can be seen as throing away good money when you are making a huge life chaning move such as emigration it would be wise to take tihngs slow and not rush headlong into buying a property. I know others who have bought almost straight away and never looked back.

[veronica]

I think the other way, yep property is low at the moment and the market is sluggish so to me that is the perfect time to buy. It gives you a lot of bargaining power so if you do decide to go that route then make sure you haggle a bit. rent is dead money, if you do decide to return to the UK within a short time then it might be an option to rent it out if you can't sell it then.

[Wooly_Cow]

There are a lot of factors to take into account in order to resolve the decision regarding buying or renting.

On the pure money side, you should list the costs and benefits of renting and buying. These will include;

• Cost of the house
• Mortgage (amount and term)
• Time in house (how long you intend to live in it)
• Interest rate to borrow – around 6% is an average for the moment – access to different rates will differ depending on your deposit and residence status. Many banks will not loan to non-residents, and some will only offer some products to those with iRRV. In all cases the higher the deposit the more secure the bank will be you aren’t going to skip the country leaving them with the loan un paid
• Interest rate to save – term deposits can get between 6-7% but this is taxable at your top rate of tax. Assuming this will be 33% for you a 6% rate will net you 4%
• House value – will the house price rise or fall. At the moment values are dropping but for good houses in good areas they are holding their own.
• Professional Fees – for buying a house reckon on at leats $2000 (builders report, LIM, solicitors, valuation report)
• Agents Fees – when you sell it again this fee is stupidly high in NZ (1.5% of the value upwards NOT including advertising costs etc.). You could try to sell it yourself, but would you want the hassle if you are moving countries as well?
• Rates – reckon on about 0.4-0.5% of the rateable value per year
• Insurances – the ‘delta’ between renting and owning is the house insurance which you SHOULD have. If you don’t you won’t even be covered for natural hazards…anyway most banks won’t let you have the mortgage without it – budget an extra $100 per month on top of the contents insurance. You might want to add mortgage protection (payment) insurance in case of illness or death.
• Maintenance – this will depend on the house but jobs here appear to cost a lot more than in Europe. The Kiwi attitude is DIY, for which you will need time, the tools and the expereince.
• A final thought is the exchange rates. Assuming you bring capital form overseas, the Kiwi is very strong at the moment. In two years, who knows where it will be. If it falls and you take your money back with you, it may have changed in relative value by quite a bit.

Hope this helps

[Sirmamac2]

We have been living in NZ for 2.5 years now and have no intentions of returning. We are still renting.I would never buy a property without knowing the area, town, job, schools ect. even if I wanted to stay in the same town or city forever. At the moment we pay in rent 60% of what we would have paid in mortgagae to live in the same house.I prefer to save the other 40% instead of paying interest to the bank( which is dead money too,BTW).Also I do not think that now is a perfect time to buy-it is yet to come. But even if it was-for only 2 years term-is it worth the hassle?I personally do not think so-the house prices are unlikely to go up so much( if at all!) to make it worth. My 2c.... Good luck with whatever you decide.

[SteveHallsworth]

Hi All,

This is my first time on here, so nice to mix with you all. I am just going through my Visa application after been selected from the pool. I plan on going out to NZ while the family are here selling our house. We plan to rent to begin with as we will be sending our furniture and belongings over too. We will buy once we know the place and find the right house. It will also take some time for the furniture to come over too.

Steve.

[Wooly_Cow]

With regards to the non financial parts for renting remember;

• You can't always take your pet and if you do you might have to pay to have the house cleaned afterwards
• You can't fix the draughty windows or insulate the roof or walls or floor or put in new heating - so you will be as cold as the landlord thinks they can get away with - be prepared for comments like ' Kiwis heat rooms not houses' and 'if you're cold put on a jumper'
• You cant decorate - well even if you can why would you - be prepared for the blue carpet everywhere syndrome
• you will be worried about every scratch and dint because you want your damage deposit back - this despite the fact when you go to look at other rentals the previous tenants have treated them worse than a pigsty and the landlord seems to be happy renting it out to you in that state
• just when you've found your long term rental and on the same week your furniture arrives from overseas and you have just paid for it to be delivered, the landlord stops by to tell you they are selling and that you have to put up with pictures of your stuff being advertised on the internet, magazines and a HUGE picture outside your house, and that every Sunday for months you will be kicked out, and total strangers under no control will get to look through your house including all the drawers ....it's called an Open home....oh and you have a month to get out!
• you can't guarentee that you will be able to rent in the school zone, so the kids may have to move schools
• you just won't settle. Eventually you have to decide (well you don't have to but most people will want to) if you are staying or going. Unless you can secure a long term rental, not owning a place will not give you that sense of stability.

It all happened to us

[wellywally]

If you need a high ltv % mortgage for 2 years in current uncertain market I'd say that the dead money argument is not necessarily true.
In two years to come out on top you are relying on capital appreciation.

Eg for a 400k home with a 100k deposit - a 300k mortgage over two years will require 36k of interest payments and you should knock off about 10k of your mortgage. So hopefully in a better position than renting. But add in buying/selling costs and the 5k (?) you may have made in interest on your deposit then it becomes a tough decision imho.

[72andsunny]

Just my two cents: Money spent on rent is not money down the drain. A better argument could be made that interest expenses (on a purchase in excess of what your expenses would be had you rented) is money down the drain.

You've got to live somewhere...

Signed,

A New homeowner