A ‘Tiny House’ is more expensive than a real house
If you’ve considered the idea of a ‘Tiny House’ as a solution to getting into your own home amid rising house prices, you could be setting yourself back and will cost you more, not only in money but in opportunity.
The tiny house movement started as an ideal for those wanting to live a simpler life, but it’s also been considered by some first home buyers looking for a ‘cheaper’ way to get into their own home. Though the idea may be enticing, the reality is if you can afford a tiny house, you could afford a real home with land, even in Auckland.
It’s more expensive than you think
The average cost to buy a Tiny House can be anywhere from $70,000 to $200,000+. You might think that’s a great price compared to the average Auckland house price of $1m but buying this is like a buying a new car, it will depreciate in value, fast. Compared to an actual house on land, where the value of land increases (in Auckland, properties double on average every 10 years).
You can’t get a mortgage
You can’t get a mortgage on a Tiny House, as it’s not a house in the bank’s eyes. So, if you’re going to borrow money to buy or build a Tiny House you won’t be getting the interest rates you see for home loans, you’ll likely be paying something similar to a personal or car loan at interest rates much, much higher.
You’d lock yourself out of the property market
If you envision buying a piece of land and putting your Tiny House on it, it’s unfortunately not as simple as that. It’s difficult to get lending on an empty section, for a bank to agree lending to purchase a section, you need to provide a fixed price quote for construction of the house you intend to build on it, only then will they consider approving the purchase. Since a tiny house is traditionally relocatable and not seen as a ‘house’, it wouldn’t count as the ‘construction quote’ they need and would not be approved.
So, where will you park or keep your tiny house? You’d likely have to rent a space or rely on someone to allow you to leave it on their property. If a Tiny House is an idea to ‘escape the rent trap’ this is definitely not the solution, as rent will only get more expensive.
If you can afford it, you can buy a real house
If you’re a first home buyer, you have the opportunity to purchase a property in New Zealand with a 10% deposit. You’re better off to take the $100,000 you would spend to buy a Tiny House and use it to potentially buy a $1m property.
You can live in a larger house that you can grow into, keep your costs low as you will be able to access to lending that’s far more affordable and increase your future opportunities as you’ll have an asset, not a liability.
Then if you still really want a Tiny House, you’ll have a place to put it and have rental income to support it!
Lucia Xiao | support@luciaxiao.co.nz
Check out Lucia’s book, Financial Freedom – 5 Steps 5 Years.
Lucia is passionate about helping Kiwis realise their financial potential so she’s written a book that covers her journey from living in a state house to building a property portfolio of over $17 million and highlights her five lessons and steps to achieving financial freedom.