HOMETOPIA insights


The First-Time Buyer's Dilemma – In Town or Out of Town?

 If you are determined to buy your first home but are struggling to afford a house close to town you have two fundamental options:

  • Buy an apartment in the city or fringe suburbs, or
  • Buy a house in the more distant suburbs and cope with a lengthy commute. 
Either one puts you on the first rung of the property ladder.

For many, the preference will be to buy a house out of town and it does have a number of benefits:


  • Houses have traditionally increased greater in value over time than apartments.
  • The majority of a home’s value is in the land, apartments have very little land;
  • As cities expand and radiate outwards so do values. Buying in a cheap, outlying suburb now may pay good dividends in the near future.
  • A three-bedroom house on a generous section will accommodate you for longer as your family grows, but a one-bedroom apartment in town maybe inadequate in a year or two.

The other piece of good news for first-time buyers looking at houses, is the option to use their Kiwi Saver funds for the deposit (if they have been saving for at least three years) and they may only require a 10% deposit. The deposit required for an apartment is likely to be higher. 

But what if you go ahead and buy out of town, set your alarm an hour earlier and embrace the commute, only to discover after a year that this is not the life for you? You miss living in town, socialising after work and the amenities city life has to offer.

Selling up after just a year is unlikely to realise a significant gain, especially if you have to pay real estate agency fees, and then you are out of the property market again. Well, you do have the option of renting out the house out of town (rental yields in the outer suburbs are often strong), moving back to the city and renting yourselves.

Any shortfall between rental income and your outgoings, including the loan repayments, will provide tax credits against your income and any necessary top-up that you need to make could be viewed as an enforced savings plan. However, you are still in the property market and eligible to benefit from any future value gains.  

Certainly it’s worth talking to your bank or mortgage broker about what could work for you.

Stephen Hart writes regularly on all sorts of property matters at BNZ Good Home.

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  • The First-Time Buyer's Dilemma –  In Town or Out of Town?

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