How do you choose a suburb to live in?
I was listening to a bunch of people having a party in our street a while back and it inspired me to write a post to demonstrate the difference, financially, between a couple of example areas.
Here in Auckland, I have noticed more than just the cost of putting a roof over your head varies between areas. In the nicer, more wealthy areas, even petrol and the “cheaper” branded supermarkets are more expensive than in the lower socio-economic areas.
For example, my husband and I are currently living in Henderson (in a future investment property). The area is cheaper than where we were previously living, on Auckland’s North Shore. We love the North Shore, but financially, we are better off in Henderson. Here is why…
Obviously housing costs are less, but even petrol and groceries are cheaper!
There is the risk too, that if you live in what appears to be an affluent area, you will feel compelled to “fit in”. This “keeping up with the Joneses” is a very expensive exercise. If you live in such an area, you need to be conscious of this and not let it steer you away from your financial goals.
If you live in a lower socio-economic area, you have no such concern. Perhaps you even are the Joneses!
For comparison’s sake:
Albany on Auckland’s North Shore
Likely rent payable for a 3 bedroom house is around $500 – $600 per week.
Buying a house in the Albany area is likely to set you back between $600,000 and $800,000. Houses for sale are generally larger and newer than the typical rental property. Due to demand and the development of the area, it is very difficult to find an older house for sale here.
If you purchase for $700,000 and assume a 5.45% interest rate (ANZ’s current 2 year rate), your home loan repayments would be $3953 per month.
Rates on a $700,000 property on Auckland’s North Shore are around $1900 per year. You also need to factor in insurance and maintenance costs.
Henderson in Auckland’s West
Median rent for a 3 bedroom house is around $400 per week.
A modest standalone house can be purchased for around $350,000. Home loan repayments at 5.45% are $1976 per month.
Rates are around $1500 per year. You also need to factor in insurance and maintenance.
Petrol, groceries, and school fees vary by location
I have seen petrol prices vary by 8c/L between the North Shore and West Auckland, that’s around $400 a year if you’re running 2 cars.
Our groceries on average now (in Henderson) cost $20 less per week than they did when we shopped in Albany! Our favourite coffee is consistently a couple of dollars cheaper than in the same supermarket chain on the North Shore.
Also, if you have children, bear in mind that schools in the higher socio-economic areas are rated higher on the Government’s decile scale. This means that they get less Government funding and your school “donations” will be higher. The school trips for these schools are also likely to be more expensive because they assume that those living in a wealthier area can afford (and will expect) this.
If you don’t need to live in Auckland…
Some people take budget living to the extreme and live in the middle of nowhere.
In a rural community rent is ultra cheap and you may even have land to graze cows and sheep and grow your own vegetables.
This might seem like a good idea, but there are some extra costs associated with this lifestyle, such as the amount of petrol it takes to get anywhere when you need to and the general inconvenience of not being near any local shops. Although, it is a form of compulsory saving if you can’t access shops to spend your money.
Some rural places don’t have reliable internet connections, so it’s not even easy to purchase items online.
If you are self-employed and can operate from anywhere, then this could be a good way to save on living costs.
So, I suppose the moral of the story is to not let your ego sabotage your financial future. By all means if you can afford to live somewhere nice, do so, but also be fully aware of how much extra this choice is costing you.