What's best? Renting or buying

What’s best renting or buying? Radio New Zealand asked me that question last week, partly because another one of those affordability surveys had come out and headlines screamed out Queenstown and Auckland were the most unaffordable places to live.

One can ask why do you need a survey to tell you that? Queenstown is a very unique place in New Zealand and the home of some serious wealth. (Personally it hasn’t had that much appeal to me, but hey I enjoy Rotovegas!)

Auckland is a different story and illustrates why I don’t like these surveys – that is they are all about trying to say the housing market is one big amorphous mass. In reality it’s lots of little markets. You could even think of it in sharemarket terms where each individual house is a separate company listed on the exchange.

House, like shares, often trade at prices which are different to fundamental economic valuations. We see that in the housing market at present where prices are around five to six times the average wage, when three to four times is considered “fair value”.

Coming back to the story and the Auckland headline. It is silly to make such a bald statement as it is such a big market. Sure plenty of bits are seriously unaffordable, while others are the opposite.

After the RNZ interview I had a good yarn with Harcourts chief executive Hayden Duncan. While he had lots of interesting things to say one thing was the state of the market. It’s a two speed job at the moment with the middle and top end doing well with good sales volumes and prices and, if anything, a lack of stock on the market. Those who do sell are making reasonably quick sales at good prices.

At the other end of the market, which tends to be the preserve of first home buyers and property investors, it’s a different story. High stock levels, low sales volumes and soft prices.

To me this, along with current interest rate forecasts, suggests to me that it is a great time for both investors and first home buyers.

It’s quite a different story to what the affordability surveys show.