There are still several areas of NZ where a typical first home buyer (FHB) is likely to find paying a mortgage cheaper than renting. But there are certainly fewer areas than a year ago, with Porirua, Lower Hutt, Tauranga, and Tasman some examples of areas where paying a mortgage has switched from being lower than rent a year ago to more expensive now.

As the official cash rate increases (likely starting Wednesday 6 October, 2021) and mortgage rates continue to rise, the relative appeal of buying a property may start to dwindle a bit for some would-be FHBs. Certainly, the popularity of alternative saving options such as online share platforms (e.g. just-sold Hatch) hints at a broadening view about people’s long-term financial plans.

One feature of the property upswing over the past year or so has been its widespread nature, with all parts of NZ seeing rapidly rising values, not just the largest cities or other main urban areas. In fact, some provincial markets have seen the largest gains, and one interesting way to look at this is the comparison of buying versus renting for a typical first home buyer.

To do this, we’ve taken the median price actually paid by FHBs in each area and assumed they have a 20% deposit, servicing that debt over 30 years at a current 2.8% mortgage rate. We’ve then compared those fortnightly repayments to the median rent in each area. As things currently stand, it’s still cheaper to buy than rent in 42 parts of NZ, with the figures for selected areas shown in the first chart. For example, in Rotorua, the fortnightly difference between a FHB paying a mortgage versus rent is currently about $206 lower.

Fig. 1 Difference in fortnightly $ cost to buy minus rent - September 2021 (Source: CoreLogic)

However, a year ago it was only a small handful of the most expensive parts of NZ where a FHB would pay more on the mortgage than rent – e.g. Thames Coromandel, Wellington, Queenstown, and Auckland. Indeed, as the second chart shows, the national difference a year ago was -$138 (i.e. cheaper to pay mortgage than rent). But as values have boomed across the country and the buy-rent margin has switched from negative to positive in more areas, the national figure is now +$22.

Fig. 2 Difference in fortnightly $ cost to buy minus rent - September 2020 (Source: CoreLogic) 
Fortnightly cost Img2

A selection of these ‘switchers’ is shown in the third chart, and it’s no surprise to see that many of these areas have been at the forefront of the upswing over the past year. In Porirua, for example, whereas a year ago there might have been savings of about $220 per fortnight on offer to a typical FHB if they owned rather than rented, that figure has now tipped the other way and buying is about $90 more per fortnight.  Tasman is another market that has seen a large shift in that buy-rent equation.

Fig. 3 Buy versus rent $ difference 2020 and 2021 (Source: CoreLogic)

To be fair, we’ve kept things simple and excluded other costs of ownership (e.g. rates, insurance). But even so, the shift in market conditions over the past year has still been stark, and with renting starting to look relatively more attractive across a growing number of areas it’s conceivable that some would-be FHBs might be starting to question the merits of getting into the owner-occupied market at current prices. We’re not saying that this will definitely happen en masse – but it’s certainly worth watching.

Fig. 4 Interest Rates (Source: RBNZ)


Indeed, the first in a likely series of official cash rate increases is likely to be delivered tomorrow, and mortgage rates have already been rising ahead of that decision anyway (see the fourth chart). Higher mortgage rates will push up ownership costs directly and, while they may also slow the rate of property price growth, values are still likely to be higher in another year’s time than they are today. Would-be FHBs are also likely to find things harder due to the tightening of the loan to value ratio speed limits.