# Buying instead of renting

## Buying is more expensive than renting

Let's get this out of the way first. If we look at buying vs renting as a purely financial decision based on the next day, in my opinion, buying is far more expensive. Let me prove this out with math:

**Scenario:** $1 Million townhouse in New Lynn, rent of $800 a week. If buying, 20% deposit.

**Opportunity cost of interest:** Remember that the money you invest can earn a return, so over time, as you pay down the house, you forgo the opportunity to invest that money elsewhere. For the purposes of this example, I will be assuming that the interest on mortgage = interest earned on savings, which is never the case (savings is always lower), but even then...

| Cost                        | Buying  | Renting |
| --------------------------- | ------- | ------- |
| Rent                        | $0      | $41,600 |
| Interest / Interest forgone | $55,900 | $0      |
| Rates                       | $2,800  | $0      |
| Insurance                   | $1,300  | $0      |
| Maintenance Fund            | $2000   | $0      |
| Total                       | $62,000 | $41,600 |

How much do you hate your landlord?

## Capital Gain

Properties change in value over time, that's a given, but this can be either direction. Properties in Auckland have historically increased in value for a variety of factors, so this does need to be factored in to your financial calculations - how much do you think your property will appreciate or depreciate over time?&#x20;

In the example above, the property would need to appreciate by about 2% per year in perpetuity to break-even, assuming all-else remains same.

There's a misconception amongst every single Aucklander you'll meet - that Auckland properties always go up. Remember investing 101 - past performance does not guarantee future returns. Ask anyone that purchased in 2021 how their home is valued in 2025.

## It's not the financials you need to consider

In writing all this, owning your home has several benefits, and the emotional side of it matters the most, for example:

1. The feeling of owning your own home...
2. Being able to buy furniture that's just perfect, because you won't ever need to move out.
3. Renovating your home to your desires...
4. Not living in anxiety of being kicked out after a year / 60 days notice.
5. Not being totally surprised by rent increases.
6. Not worrying about moving around, and the stability that comes with a location.

Long story short, if you are buying because you don't want to rent anymore, it's not the financials you should be relying on for why.
