Is renting that bad of an idea?

Here we show the expected outcome of my place either renting it for $815 per week or buying it at RV with a mortgage at 5% average over 30 years with a 20% deposit.

Executive Summary

Our view is simple: renting is not the financial mistake it is often portrayed to be.

If you are not:

• looking to add value through renovations,
• confident you have unique insight into an area becoming materially more attractive, or
• seeking long-term stability and security for yourself or your family,

then renting increasingly looks like the financially superior option. At today’s extreme valuations, buying a home largely relies on one assumption: that property will continue becoming dramatically more unaffordable. We don’t believe that is realistic.

Our base case is that property must grow slower than inflation, or experience a material reset (potentially up to ~50%) to realign with household incomes.

When capital growth is muted or negative, the long-held belief that “renting is dead money” collapses. In that environment, renting preserves flexibility, reduces risk, and frees capital for diversified investment.

1) The real cost of owning is far higher than most people realise, and often exceeds rent by tens of thousands per year

When interest, rates, insurance, maintenance, and risk-cover are properly accounted for, ownership carries large recurring costs that don’t build equity. For many households, renting frees substantial cash flow that can be invested elsewhere with greater flexibility, diversification, and long-term return potential.

2) Old rules of thumb distort housing decisions, including the belief that property always doubles and that renting is “paying someone else’s mortgage”

Homeowners with expectations of perpetual outsized capital growth and simplistic rent-versus-buy comparisons ignore the affordability of shelter for citizens. On the other hand, paying the bank hundreds of thousands in interest is still “dead money”; the relevant question is total cost of shelter, not who receives the payment.

3) Buying can still make sense, but only when you are intentionally paying for stability, control, or long-term certainty

Ownership remains rational when it delivers non-financial value: family stability, school zones, autonomy to modify or repurpose a home, or commitment to a true forever home. In these cases, the cost is a lifestyle choice, not an investment justification.

The Seven Hard Truths of Paying for Shelter in NZ

Most New Zealanders treat housing as something you simply have to do. You either rent or buy, then live with the outcome. But paying for shelter is not static. It is a long-term financial decision that can either support your wealth or silently erode it, depending on how and when you do it.

The real issue is behavioural and structural. Housing decisions are often driven by social expectation, fear of missing out, outdated rules of thumb, and recency bias, not by clear analysis of cash-flows, opportunity cost, flexibility, or risk.

As a result, many Kiwis overpay for shelter, underestimate the true cost of ownership, and anchor their future financial security to a single, highly leveraged asset.

What follows are The Seven Hard Truths of Paying for Shelter in NZ, split into two parts:

• A. Why Renting Often Wins at Today’s Prices, and
• B. When Buying Still Makes Sense.

Together, these truths are designed to reframe the renting-versus-owning debate, not ideologically but economically, and help you decide when paying for shelter is a rational financial choice, and when it is primarily a lifestyle decision.

Section A: Why Renting Often Wins at Today’s Prices

(This section explains why, for many households, renting is no longer a stop-gap or failure, but a rational financial strategy at modern valuations)

1) People forget the true costs of property ownership

Mortgage repayments are only the beginning, but they are significant due to high valuations.

Owning a home comes with a long list of ongoing and often underestimated costs, many of which are invisible when people compare “rent versus mortgage”.

Using the home I currently rent as a real-world example, the non-mortgage costs of ownership alone are estimated at $15,470 per year, or roughly $300 per week (outlined below).

I currently rent this property for $815 per week. While renters pay this in full, homeowners still face unavoidable non-equity costs, including insurance, council rates, maintenance, and mortgage protection, which I estimate to total around $300 per week for this property.

When these often-ignored ownership costs are properly accounted for, the net cost comparison for shelter alone is that renting costs approximately $515 per week more than owning, rather than the full $815 rent amount.

However, ownership does not stop there.

Once mortgage repayments are included, the total effective cost of owning this property rises to approximately $1,600 per week, almost double the $815 weekly rent.

To put that in annual terms:

• Renting: ~$42,380 per year
• Owning: ~$83,123 per year
• Difference: ~$40,743 per year in additional cost

That difference alone represents most of the interest cost I would be paying if I owned the property.

If that $40,743 per year were invested instead, alongside the $260,000 deposit, and achieved a long-term return of around 8% per annum, the projected outcome after 30 years is more than double the net value of owning and paying off the house, under typical assumptions.

Below is the breakdown of the estimated annual ownership costs used in this comparison, based on a $1.3 million RV, a 20% deposit, and a 5% interest rate:

Cost Item	Annual Cost
Interest	~$52,000
Insurance	~$3,900
Council rates	~$4,550
Maintenance and repairs	~$6,500 (averaged, lumpy in reality)
Additional life insurance and/or mortgage protection	~$520

These costs are incurred every year, regardless of whether the property increases in value.

Renters avoid most of these costs entirely, allowing surplus cash to be invested elsewhere, often with far greater diversification, flexibility, and liquidity than a single leveraged asset.

2) Ownership reduces flexibility, and exiting is usually expensive

Property ownership locks you into a fixed asset in a fixed location.

If your employment changes, your health declines, your family situation shifts, or better opportunities arise elsewhere, selling is slow, costly, and uncertain.

Many buyers assume they can simply rent the property out, but this often worsens the outcome:

• Rental income becomes taxable
• You incur property management fees
• Vacancy risk becomes real
• Maintenance obligations increase

What looks like flexibility on paper often turns into lower net returns and higher stress. Renting preserves optionality in a way ownership cannot.

The financial arithmetic is only part of the story. Many housing decisions persist not because the numbers work, but because certain beliefs go largely unchallenged.

3) Old rules of thumb have replaced actual analysis

Many housing decisions in New Zealand are still driven by old rules of thumb rather than clear financial analysis.

i) One of the most common is the belief that “property doubles every 10 years.” This is an old wives’ tale, and a dangerous one. Property did behave roughly like that over parts of the last 20 to 30 years, but that period coincided with falling interest rates, rising leverage, and a once-in-a-generation affordability bubble.

If property doubled repeatedly from here, it would eventually be worth over 20 times household income. Today, it already sits around ~7 times. That maths simply does not scale.

ii) Another equally persistent myth is: “At least I’m not paying someone else’s mortgage.”

This framing is emotionally appealing, but financially misleading. When you rent, you are paying for shelter at a known, capped cost. When you buy, you do not avoid paying a mortgage, you simply replace a landlord with a bank, and typically pay significantly more in interest, rates, insurance, maintenance, and transaction costs.

“Framing rent as ‘dead money’ while ignoring tens or hundreds of thousands of dollars paid in interest is mental accounting, not sound financial reasoning.”

Over the first 10 to 15 years of a mortgage, the majority of payments go to the bank, not toward owning the home outright. In many cases, the interest alone exceeds what an equivalent property would cost to rent, before accounting for rates, insurance, repairs, or lost flexibility.

The relevant question is not who you are paying. It is what the total cost of shelter is, and whether that cost is justified by stability, control, or long-term certainty you genuinely value.

4) Sometimes you can find a genuine bargain, but they are rare

There are moments where buying can make sense purely on price.

This usually requires:

• buying well below replacement cost,
• purchasing from a distressed or highly motivated seller,
• or acquiring a property that is structurally sound but temporarily unpopular.

True bargains are obvious in hindsight, scarce in real time, and often uncomfortable to buy. If the numbers genuinely work without relying on strong capital growth, buying can be rational.

The key question is simple: would this still be a good decision if prices don’t rise for a decade?

Section B: When Buying Still Makes Sense

(Despite the financial headwinds, buying a home is not irrational, when the motivation is honest and intentional)

5) Stability for family may be worth paying for

If you want certainty, particularly for children, owning may still make sense.

Examples include:

• securing a preferred school zone
• avoiding the stress of forced moves
• eliminating landlord uncertainty

This stability has real, non-financial value. But it is not free. You are explicitly paying for emotional and logistical security.

6) A forever home is a lifestyle decision

If it truly is your forever home, and you simply want it, then the decision becomes less about returns and more about acceptance.

You must acknowledge the opportunity cost:

• the foregone ability to invest surplus capital elsewhere
• the concentration risk of a single, illiquid asset

There is nothing wrong with this, but it should be a conscious lifestyle choice, not a disguised investment strategy.

7) Absolute control requires ownership

If you want complete freedom to:

• modify your home
• repurpose spaces
• run a business
• create recreational or dual-use areas

then ownership is non-negotiable.

Renting always comes with constraints. If autonomy matters more than financial optimisation, buying may still be the right call.

Conclusion

Talk to us about your options