Rent vs. Buy - Is my math correct? Am I missing anything? (An Analytical Approach)
- Thread starter turboizak
- Start date
beaverpond
New member
@turboizak Interesting anlargy. Probably similar to my outlook although I invest in machinery giving me more than 6% return.
Without touching on you analysis, which I agree with wholeheartedly. I honestly think we are past the peak but heading downhill fast. Wages will not increase as fast as previous Govt. ETS still to be implemented. This will continue, in the short term, to exert inflationary pressure. Interest rates will increase and I predicted 10-12% interest rates at the start of this. I would now predict 9-10% interest rates peaking. Inflation will remain stubbornly high in the short term.
Without touching on you analysis, which I agree with wholeheartedly. I honestly think we are past the peak but heading downhill fast. Wages will not increase as fast as previous Govt. ETS still to be implemented. This will continue, in the short term, to exert inflationary pressure. Interest rates will increase and I predicted 10-12% interest rates at the start of this. I would now predict 9-10% interest rates peaking. Inflation will remain stubbornly high in the short term.
@turboizak Please use shares, not stocks. This is NZ.
Break this habit now
Adding to your calculation there is a huge positive psychological effect from the stability owning your own home has. When renting you never quite know what will happen next.
Though I do agree the current market is crazy and likely unsustainable.
Break this habit now
Adding to your calculation there is a huge positive psychological effect from the stability owning your own home has. When renting you never quite know what will happen next.
Though I do agree the current market is crazy and likely unsustainable.
@usmc0811 I dont know about that. I dont think I would get much psychological benefit knowing all my eggs are in one little basket and a huge debt waiting to be paid every pay cheque without fail. I have seen thousands of examples of people in NZ having all those eggs cracked for many reasons like EQ damage, declaration of being EQ prone, flood damage, or declaration of flood prone, leaky homes, losing your job due to various reasons such as health, negligence, redundancy, Kainga Ora tenants from hell moving in next door, divorce etc. Extremely risky indeed to say the least.
I think the psychological benefits are much bigger of having a huge arsenal of assets behind you so that you never really need to worry about paying your rent and if something sucks about where you live then giving 4 weeks notice and moving somewhere else.
I think the psychological benefits are much bigger of having a huge arsenal of assets behind you so that you never really need to worry about paying your rent and if something sucks about where you live then giving 4 weeks notice and moving somewhere else.
@turboizak It feels a bit of a cherry-picked hypothetical here. Why not put down 20% and leave the rest in the market? Your 6% return will actually be 5 x 6% as the whole house appreciates with capital gains, not just your deposit.
susienasirlily
New member
@turboizak I think I’d modify two things
(1) I think 8% is generous for capital growth of your investment and non capital returns eg dividends will be taxed (whereas your house price growth won’t)
(2) your income will likely rise with inflation over the ten years but your mortgage payments will stay the same so you will start to be able to also invest more than 250pm in the buy scenario
(1) I think 8% is generous for capital growth of your investment and non capital returns eg dividends will be taxed (whereas your house price growth won’t)
(2) your income will likely rise with inflation over the ten years but your mortgage payments will stay the same so you will start to be able to also invest more than 250pm in the buy scenario