What are the concerns about the housing market? How can renters off set housing costs as homeowners do? What are the lies about home ownership and capital gains and how to hedge against inflation?


Virtual Mortgage

How to Hedge against Rental Inflation?


Do current changes in the housing market concern you?


Looking at the whole picture painted in previous posts about the renting culture, renters’ habits and the state of housing, you possibly expect something to happen. All parties have talked about housing as priority (at least during the election campaigns) and more ideas surfaced to fix the housing issues. For instance the council housing committee chairman G. Livingston want to introduce a mandatory rental housing register for roughly estimated $1.5 million a year.


How would you feel about $1.5 million plus a couple of millions of Dollars for rate increases for the next year to be paid by renters and homeowners alike?  And what are the benefits to have a housing register on top of the “bond register” and the Tenancy Tribunal database maintained with taxpayer’s money. Putting another layer of levies onto rents - the reactions  will be interesting.


A sensible question is — how will more fees improve the real problem, the housing standards? And that is my point, what is the practical approach to build more houses? As you can read about the Millennials they have needs for mobility and housing. From economical point of view new built housing cannot be made cheaper  when prices for all sorts of services, material and labour are going up. That leads only in one direction, more rental housing is needed, also because it takes longer to save for a deposit or for qualifying for a mortgage. More renters, more immigrants, more housing—simple like that.



Debt funded home ownership and capital gains


Despite renting is cheaper in the short run, home ownership is still regarded as the preferred option to minimise housing costs and hedging against inflation in the long run. Well, in times before the Global Finance Crisis the focus on capital gains has  really worked for most homeowners. For newcomers (investors, first-home buyers) it has been difficult to understand the increasing diversity of the housing market and the two speed economy.  That has triggered skyrocketing house prices in major cities and areas with negative capital gains.


Booming cities have bred a high tolerance for debt funded home ownership. That risk is visible on dated owner-occupied homes when people run out of money for urgent repairs and maintenance.


Renters are experiencing a similar situation triggered by recent law changes driving rents to levels never seen before.  That makes home ownership more successful in cumulating wealth—at least that is the common belief. But striving for a good paid career in cities where first-time buyers cannot afford to live, renting might be the better option. Driving up income is the more secure option than being a slave of a mortgage.



Hedging against inflation


When accepting that the housing costs for home owner-occupiers and renters are similar and considering that inflation applies equally to both—why then would you believe that renters are disadvantaged?  The difference between both groups is that homeowners save  by paying off a mortgage. Often misunderstood capital gain is not really a gift. I would call it a reward for long-term home ownership and a compensation of huge expenses for major renovations (new roof, new kitchen, upgrades for bathroom, heating, insulation, etc).


If a renter would behave similar by saving a similar amount of money like paying off a home loan, it would create an amount of cash with compounding interests and returns on term investments similar to homeowner’s mortgage, but without risks living in a debt funded house.


With this deliberation above, a house is considered to provide protection (capital gain) against the decreased value of a currency (inflation). Yes, in theory and not looking at  the holding costs for keeping a house up to standard and by overstating capital gains as a gift.

In the same way for non-housing wealth a “virtual mortgage” can be the alternative.



Pay yourself a “virtual” mortgage


A “virtual mortgage” is a savings account for the purpose of financial gains. Going back the Dollar comparison renter/home owner, in this example the home owner pays 270 Dollars on principals for the home loan (re-payments, 14k per year). If you would pay these 270 Dollars into your “virtual mortgage” you would already own 44,970.41 Dollars in three years.


Klauster Properties Ltd - Renter’s Blog

Rent or Own - Decision at some stage in life?

The assumption is you re-invest the cumulative amount of savings into term-investments. Individually the amount will slightly differ depending on the interest rates, taxation, etc. But it clearly shows impressive results and the positive impact of compounding interests.



To take away

Everybody is able to break the cycle and save few Dollars a week. Also when renting, what keeps you away from investing in return-producing assets, company shares, or managed funds, bonds or alike? You can do it, too.



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Renter’s Blog lead to a real person, IT professional, investor, landlord and business owner with interests in sharing experiences. Life is a dream with a deadline, happiness comes from making the right choices and having realistic expectations.


Confession: I have been a happy renter for more than 25 years before buying a family home and later becoming involved in property investments and developments.


I used to live in apartments or rental homes, worked in many different countries and experienced different housing standards and renting cultures. I would love to see a social and legal frame work around housing policies that supports renters and landlords alike.

Share your view—follow this blog!


270 per week

52 weeks




Interests 1st year




1st year







5% term-investment







12 months


270 per week




2nd year







5% term-investment







12 months


270 per week




3rd year