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Rent-vesting: Re-thinking the Kiwi Dream

Takanini, Auckland in 1970s - image via https://teara.govt.nz
Takanini, Auckland in 1970s - image via https://teara.govt.nz

The Kiwi Dream: the quarter acre patch of grass, weatherboard home and the family wagon. Throw in a bach and you might even be keeping up with the Joneses. Kiwis love property, and the idea that a secure future is all wrapped up in home ownership has been drilled into us for generations.

But our little corner of the world is rapidly changing; property prices have been sky-rocketing, lending restrictions are tighter, population is growing, land is being subdivided and apartments are being built by the day.

Many consider themselves pushed out of home ownership all together. We might even consider ourselves lucky to be renting near a quarter acre park, let alone expect one in our own backyard. Bonus that you don’t need to mow the lawns though, right?   

Home ownership rates


Lowest       
61.2 per cent in 1951 

Highest       73.8 per cent in 1991 

2017            63.2 per cent

Maybe we need to think outside the box when it comes to property. One concept which has taken off overseas, and could be just as valuable in New Zealand, is rent-vesting. Rent-vesting is the term given when someone rents in a more desirable (ie. more expensive) location, while buying and renting out their first property somewhere they can afford.

It could be a viable option for Kiwis who wouldn’t be able to afford where they really want to live, particularly those living in Auckland where career opportunities and lifestyle benefits might be a plenty but the median house price is a whopping 9.21 times the median household income (as at Aug '17).

With rent-vesting, you’ll be sacrificing the security of living in your own home, but it might mean you can stay living close to work and friends, in those all-important school zones, and still live a stones throw from the action, while also getting a foot on the property ladder. You could consider buying in outer, less expensive suburbs of your own city, or even consider other regions (you can compare median house prices across New Zealand in the table below).

Like all property purchases, there’s still a few things to consider – like tax obligations, rental returns and costs, potential capital gains, and your level of flexibility in the future should your situation change. If you’d like to discuss if rent-vesting might be for you, feel free to get in touch with an Apex mortgage specialist for a quick chat.

Median House Price (Aug '17)

NZ total530,000
Whangarei430,000
Auckland metro840,000
- North Shore1,071,000
- West764,000
- Auckland Central950,000
- South793,000
Hamilton540,000
Tauranga635,000
Rotorua350,000
Gisborne235,000
Hastings436,000
Napier405,000
New Plymouth416,000
Wanganui202,400
Palmerston North385,000
Wellington metro500,000
Nelson518,000
Christchurch440,000
Timaru332,750
Dunedin345,500
Queenstown - Lakes850,000
Invercargill260,000