When it costs you $600,000 for a 2 bedroom unit in Auckland and up to $1 million for a house in Auckland, you might think that a house (with land 883 m2) located roughly 2.5 hours drive from Auckland is a bargain. But read this and think again
Rewind back the years to thirty years ago. Imagine having $32,000 in 1986 (that’s the equivalent of $250,000 in 2018 terms)
$32000 in 1986 was a lot of money. In fact you could have bought a 2bedroom unit in Onehunga for that price and you didn’t even need a mortgage.
Suppose you decided to pass on the 2-bedroom Onehunga unit and instead bought a three bedroom house in Tokoroa (it comes with 883m2 land too)
30 years later in 2015, the Tokora property has gone up three fold to $91500 which sounds like a good return.
Except after 30 years that 2-bedroom unit in Onehunga, Auckland will be worth $500,000 (a 16 fold increase)
30 years ago, a 3 bedroom house in Tokoroa was worth the same as a 2 bedroom unit in Auckland.
In 1986, one Tokoroa house could buy one 2 bedroom Onehunga unit.
In 2015, if you sold that 3 bedroom house in Tokoroa, you would have just enough to pay for the deposit for a 2 bedroom unit in Onehunga.
Or put it this way, you could have sold the Onehunga unit and purchased 5 Tokoroa houses with that money.
Or even better, refinance the Onehunga unit and buy another 2 bedroom unit in Auckland.
That reminds us the importance of Location, Location, Location.
Choosing the right location could increase your wealth significantly.