Recent newspaper reports back up what we’ve been hearing anecdotally — that in some parts of the city the demand for rental housing is so high that landlords are able to extract premium rents.

In fact I met with a young family last week who were recently arrived back from a few years working in Australia. They’d been staying with family while they looked for a house to rent and were surprised by what you could get for the level of rent they were willing to pay. It wasn’t what they expected at all.

“We might as well buy something if that’s all our rent gets, its dead money anyway”. Too right.

So we did some numbers and are now in the process of getting mortgage pre-approval for them. But here’s a look at the size of mortgage different rent levels will get you.

Weekly Rent Loan size
$300 $233,000
$400 $310,000
$500 $388,000
$600 $466,000
$700 $544,000

These figures come from the calculator on Westpac’s website and assume a 25 year loan term, an interest rate of 6.10% and a deposit of about 10%. Current as at 11 Feb 2011. T&C’s apply.

Lets compare:

In Kingsland $700 a week gets a 4 bedroom villa with a carport on a tight section but you could buy a 3 bedroom house with carport and a bit of lawn in Avondale for a much more palatable $500 a week.

In Milford you’ll pay $600 a week to rent a reasonably modern 3 bedroom house with double garage but why not move up to the beautiful Hibiscus Coast (I’m biased cos live there) and get a 3 bedroom house on just under a quarter acre for about $500 per week.

Yes, if you’re renting in the inner city moving to the suburbs might mean a bit more commuting. Having said that, if you can come up with the deposit (or parents let you use the equity in their house) you may be able to buy a cool apartment and stay put.

At the end of the day there are several ways to skin this ‘i want to buy a house’ cat. The first step is understanding what you can actually do (that’s what a mortgage pre-approval is all about) and taking it from there.

So with inner city rents as they are, maybe now is a good time to get serious about a house? It costs nothing to find out.

 

About Campbell Hastie

Cam is one half of Auckland based mortgage brokers, The Go 2 Guys.

He makes a living by sharing what he knows about mortgages with people, arranging mortgages for people and then insuring people.

He doesn't claim to know everything about mortgages himself which is why he teamed up with David Mercer — hence the ‘2’ in Go 2 Guys.

He writes posts regularly on his blog and has been told he has an ability to share his knowledge in a simple and sometimes memorable way.

Feel free to comment and ask any questions. Contact Campbell Hastie m: 027 697 7789.

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