Working out the cost consequences of different property locations

Be smart assessing the long term cost difference between new homes you like that are in different neighbourhoods by using our new calculator

Property

Be smart assessing the long term cost difference between new homes you like that are in different neighbourhoods by using our new calculator

24th Aug 20, 9:26am by David Chaston

Location, location, location is the real estate mantra.

But the final choice between properties you see as equally desirable might come down to where they are.

When buying a property, or deciding between multiple properties, it is important to take into account the location of the properties in relation to your primary destinations, such as work, family and recreation.

While a property closer to a major city may be more expensive on paper you may find that when travel costs are taken into account it may be a lower cost option.

We have a new calculator* that can help resolve the cost side of this problem.

It's a calculator that will help quantify the additional costs (or savings) you will have depending on the extra distances between properties.

Obviously you need to know the distances between the alternatives. And you need to know the average cost of fuel per kilometre (km), the cost of maintenance per km (maybe 5c/km) and depreciation (divide the chance in value over time by the kms you will drive).

With this detail, the rest is easy - our calculator will do the rest, and show you how it does it. See it here.

* This calculator was developed by Calculate.co.nz and is in our calculator toolbox as part of our partnership with them.

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8 Comments

by Kauri | 24th Aug 20, 9:34am 1598218487

Nice little calculator. I think the main point for me is "value of your time per hour". For example, when your children are young and you lose an extra few hours per week with them due to travel I think it's very hard to put a price on this. The same could be said for the value you may place on recreation - i.e. going for a walk/run/glass of wine at sunset on the balcony in the evening etc rather than commuting.

by Lanthanide | 24th Aug 20, 11:36am 1598225813

Sure, but then consider the alternative - putting money into rent from which you get no long-term gain.

Paying off a cheaper mortgage, and spending more hours commuting, is still a better long-term decision. Your children might be glad they can borrow off the 'bank of mum and dad' when they reach their 20s and need a house deposit, also.

by Cowpat | 24th Aug 20, 12:31pm 1598229104

I take it that you have done a comparison between those that rent and those that decide to take on home ownership, or is it just your investment strategy.
Last week Interest provided details of a couple 25-29 years , who purchased their first home June 2010, and the amount available (the gain) if they were to sell and move up the 'ladder.".My question would be, if a 25-29 year couple,(call them Gregorios and Jenefie ) decided to rent in June 2010 , initially sharing a 3 bed with another couple, or similar for the first 5 years, ( certainly not extraordinary), then were to rent alone a 2 bedroom for the remaining 5 years , how far behind after ten years would the rental couple be, than the couple who purchased their starter home .Gregorios and Jenefe would spread the equivalent twenty percent deposit, equally in two year bank deposit accounts and a Fisher Fund, (or similar New Zealand growth fund), and any annual difference between mortgage repayments and rent over the ten years be , if available, reinvested similarly. To make things simple Gregorios and Jenefe would always rent the national median rental home with rents rising annually.

by Averageman | 24th Aug 20, 9:56am 1598219810

Nice idea. When you look at the savings of being able to work from home there is a significant swing in the "who cares were you live" camp. Accept this is limited to mainly white collar jobs like Banks, other finance, insurance, IT etc etc, but it is clearly underlined by the mass exodus from Awkland the day before each lock-down occurred.

by M Munson | 24th Aug 20, 11:18am 1598224697

(divide the chance in value over time by the kms you will drive). Should that be change?

by Big_Data | 24th Aug 20, 12:07pm 1598227643

Very cool. Of course if you get an EV some of these numbers become pretty irrelevant ;-)

by Yvil | 24th Aug 20, 12:44pm 1598229865

Really great calculator, well done Interest!

by Dale Smith | 24th Aug 20, 2:51pm 1598237465

But to add up all costs you would need to also include the difference in the property values between the two locations, and what that meant to take on the extra debt and interest from one over the other.

And how does it calculate the impact on others, which is the first input value, when it is highly unlikely the 'others' are going to exactly the same places of work.

Either way, it would show that buying in the CBD to work in the suburbs is more expensive than the opposite.