Header Ad Module



No announcement yet.

Economist says it's cheaper to rent - What are your views?

  • Filter
  • Time
  • Show
Clear All
new posts

  • Economist says it's cheaper to rent - What are your views?

    What are your views on this ?

    Latest breaking news articles, photos, video, blogs, reviews, analysis, opinion and reader comment from New Zealand and around the World - NZ Herald

    Shamubeel Eaqub says he tells his friends not to waste their money buying houses. "But they don't listen to me."
    The 31-year-old economist at the New Zealand Institute of Economic Research is a dedicated renter and has never wanted to buy his own house.
    "Houses are very expensive compared to renting."
    His thinking challenges the norm. In the areas that appealed to him, house prices were about $1 million. Rent would be about $600 a week and a mortgage significantly more.
    He said he and his wife invested the money they saved by renting so that they could provide for their retirement.
    "New Zealanders' obsession with property is madness."
    It seems growing numbers agree with him - in the year to June 2011, 35 per cent of households were renting, according to Statistics New Zealand. In 1991, the number was 26.2 per cent.
    But David Kneebone, executive director at the Commission for Financial Literacy and Retirement Income, said most Kiwis were not as disciplined or financially savvy as Eaqub.

    He said that could leave them vulnerable if they reached retirement age without owning a home."If you're paying rent in retirement, and are reliant just on New Zealand super, your standard of living is going to be considerably different to if you were living in a mortgage-free home." He said a freehold home at retirement age was an important goal for most Kiwis.
    If they did not have that, they would have to have saved hundreds of thousands of dollars - at the very least.
    Kneebone gave the example of a property that would rent for $800 a fortnight, with a mortgage of $1500.
    "The challenge is, can you save the $700 difference and invest it?"
    People saving and renting would need to be sure they would never dip into the pot, Kneebone said.
    He said it was hard to predict what would happen in the real estate market. It was possible that in a few years rents would have increased markedly, while a mortgage payment taken out in 2012 might not.
    He said homeowners also had an asset that could appreciate in value more than other assets and having the mortgage payment to meet reined in the part of human nature that liked to satisfy short-term needs.
    "The mortgage payment is good for us, it happens automatically, reducing debt. Can you maintain the discipline over a lifetime of being a renter to build up that sum? If you can, go for it."
    Bankers association chief executive Kirk Hope said banks could advise on different investment vehicles to people pondering the question.
    Hope said people could sometimes be swept along in the emotion of purchasing property. "Treat it like a financial decision because of the level of commitment involved. Get appropriate advice to consider what's right for you."
    Eaqub conceded that for many people buying a home was not a purely financial decision. Some were worried about security of tenure or wanted to be able to make renovations, or change the garden.
    "If it's a financial decision, don't do it. If it's a lifestyle one, do."
    You're joking, right?
    Laughing too hard to choose an option.

    The poll is expired.

  • #2
    Probably true in some respects but its complicated. My answer...buy cashflow positive investment properties in a cheaper area and rent in the area you desire to live in.

    Last edited by Shane D; 18-07-2012, 10:46 PM.


    • #3
      Alistair Helm of Realestate.co.nz has a discussion with Shamubeel Eaqub - Principal Economist of the NZIER to talk about the NZ economist outlook of 2011 wit...


      • #4
        You have to ask the question: Why would the Landlord buy a property and then rent it out to you at a loss?

        The Landlord's costs are at least as much (and in some aspects more eg insurance) than the costs of an owner/occupier.


        • #5
          The landlords costs are paid for from pre tax dollars. The owners costs from post tax dollars.

          Come on. We here know the advantages of owning rather than renting. Personally, I am living in a home which would cost me in excess of 4 times what my current loan repayments are if I was renting it (no, I'm not taking into account rates, insurance and maintenance). Never saved since I purchased my first home in '83//84 (ish). Always paid down the loan. Seems that this chap may regret his investments if they fall over as so many have in the last decade.

          The best return on your money is the return of your money.
          Facebook Page


          • #6
            An economist who doesn't seem to understand the power of leverage.... Fancy that?!?!?!?!



            • #7
              Check back with him in 34 years when he is paying an ever increasing amount in rent on a fixed income


              • #8
                Of course it's cheaper to rent short term. The reason to buy for the long term is that:
                2012 - House $300,000, you 30 years old, rent $300 pw (5%), mortgage $400 pw (7% long term ave)
                2032 - House $1,500,000 (based on ave growth since 1957), you 50 years old, rent $1,500, mtge $400 pw (if paid interest only & not extended)
                The figures may not be exact, but show how it pays off later.


                • #9
                  he's a young well paid economist with no kids

                  why would he want to lock himself into bricks and mortar when he

                  could easily be offered a job paying double overseas with accom. thrown in at any time

                  the people who make the best landlords and property investors are the old ones

                  who've been round the block, seen a few cycles and aren't going anywhere

                  it's a young in a hurry who are most likely to screw up

                  this really very simple, long term game


                  when the old screw up it up

                  it's usually 'cause they listened to some fast talking salesman

                  trying to make a buck of their trust
                  have you defeated them?
                  your demons


                  • #10
                    An economist - says it all.
                    Long on edgamicashun
                    short on real experience.


                    • #11
                      He's 31. He should have some real world experience. You would hope.


                      • #12
                        It's not a bad message for PIs. If more want to rent - that means greater demand....umm does that mean a rent increase is viable? Yaaooh - (a note to renters: a rent increase on my properties will only claw back some of the increases in my rates, insurance not put lots of coin in my pocket - I'm not a 'greedy landlord').


                        SEARCH PropertyTalk, About PropertyTalk

                        BusinessBlogs - the best business articles are found here


                        • #13
                          Jay sus! I am!
                          Facebook Page


                          • #14
                            Originally posted by donna View Post
                            Yaaooh - (a note to renters: a rent increase on my properties will only claw back some of the increases in my rates, insurance not put lots of coin in my pocket - I'm not a 'greedy landlord').
                            Quite right Donna.
                            Not like those 'greedy banks' who have been bleeding us dry with those record low interest rates recently.
                            How dare they !


                            • #15
                              Still way high by international interest rates, though. They are creaming it if you do that comparison.