Is it cheaper to rent or buy a house?

The tables above show very clearly that owning a home in New Zealand is generally not cheaper than renting. In expensive regions like Auckland, Bay of Plenty and Otago the difference is most pronounced and renting is almost $2,000 cheaper per month, or around $24,000 a year. 

In more affordable regions like the West Coast, Southland, Taranaki and  Manawatū / Whanganui, the difference between rent and mortgage and rent payments is less – between $721 per month (Southland) and $407 ( Manawatū/ Whanganui).

The one notable expectation to the rule is Gisborne. Here, paying rent is $151 cheaper than paying a mortgage per month, which works out to a saving of around $1,800 annually. Who wants to move to the East Coast? 

• Mortgage payments: We used our Property Price Index to find each region’s average price, assuming a 20% deposit, a 30 year term and a 5.99% fixed interest rate. Then we plugged it all into a mortgage calculator to find the monthly mortgage payment. 

• Rent payments: These figures are from our Rental Price Index. The index shows weekly average rents, so we divided these by 7 and multiplied by 30 to find the average monthly rent price. 

We didn’t include any extra costs associated with renting or owning a home as these vary considerably, depending on the home owner and/or renter. With that said, homeowners generally incur more extra costs than renters, because they’re responsible for maintaining, insuring and repairing their homes. 

That means owning your own home costs a lot more than your mortgage repayments, and the cost gap between renting and buying is actually much wider than the above tables suggest. After these costs are considered, it’s likely that owning your home is more expensive than renting everywhere in New Zealand, including Gisborne. 

Owning your own home is almost always more expensive than renting, but there are expectations to the rules such as:

A larger deposit means a smaller mortgage, which equals lower mortgage repayments. That’s why, if you’ve got a large chunk of cash sitting in the bank or coming your way via inheritance, it could be worthwhile looking at buying a home in New Zealand as it may be cheaper than renting. 

At the more affordable end of the market, the difference in cost between paying rent and paying a mortgage can be lower. For example, mortgage repayments on smaller apartments and townhouses in affordable areas in cities may be cheaper than rent – so might small homes in more regional areas (especially places like Invercragill, the West Coast and  Manawatū). 

If interest rates decrease in the future, mortgage repayments will also decrease, which may shrink the cost gap between renting and owning a home. In fact, if interest rates were at their recent lows of around 2.5% mortgage payments would be cheaper than rent in most regions, except for Auckland, Otago, Nelson, Marlborough and Waikato.

Rent to buy schemes can help make owning a home much more affordable by allowing aspiring home owners to transition from renting to buying with the support of a not-for-profit organisation. Most of these schemes are only available to certain buyers who meet eligibility requirements around things like income and prior property ownership. 

Renting is cheaper than buying a home, it’s true – but there’s a good reason why so many Kiwi choose to own property. It might be for extra security, knowing that a landlord can’t evict you out of the blue. Or perhaps it’s a forced savings scheme, via a mortgage. Some just want the ability to live how they want and make changes to their properties as they see fit.