select
|

Rising urban and suburban rentals should strengthen tenants' desire to become home owners

Recent reports from residential property agents working in South Africa’s big cities, Johannesburg, Durban and Cape Town, show that rental rises have often been way ahead of the current inflation rate and often, too, as a percentage well ahead of house price rises, which are now not as spectacular as they were a year ago.

Rentals today, said Mike van Alphen, National Manager of the Rawson Property Group’s bond origination division, Rawson Finance, are increasing faster than he can ever recall in the 45 years that he served in the home loans sector.

“According to one report, studio apartments on Cape Town’s Atlantic Seaboard are now renting at R7,000 to R9,000 per month, one bedroom apartments at R8,000 to R10,000 and two bedroom apartments from R9,000 to R22,000 – and elsewhere the figures are much the same.”

While this is good news for buy-to-let investors, whose numbers are increasing rapidly, said van Alphen, it should be causing South Africa’s diehard inveterate tenants serious concern.

“In the bond origination sector we regularly come across individuals who have literally grown up accepting that they will probably rent all their lives.  All the long term implications of this have escaped them and in particular we find that they have no made absolutely no provision for accommodation once they have stopped being wage earners – and attitude is far more widespread than most people realise.”

Many dedicated tenants, said van Alphen, have at some stage actually considered buying a home, but have shied away when confronted with the need for a 10 or 15% deposit as well as bond registration and transfer costs.  (The last two on a R900,000 bond will, for example, amount to R42,400, i.e. some 5% of the total cost if a 10% deposit is found.)

Confronted with these costs and comparing them to the rentals they pay, said van Alphen, many tenants take the easy option to continue to pay rent.  This, in effect, he said, means that they are usually helping some other investor – not themselves – to become a property owner and in the current low interest rate scenario, the tenant will very often help to pay off the investor’s loan surprisingly quickly.

Dedicated tenants of this kind, said van Alphen, should contact a reputable bond originator and with his help set about replanning their finances.  As a first step, if they have debits or impaired credit records, they must pay these off and put matters right with their creditors.  Then they should sit down with a bond originator and work out just how much they can save if they put their minds to it.

“Our experience as consultants,” said van Alphen, “shows that with a little restraint and a little austerity, savings can be achieved and within a relatively short space of time the aspirant home owner can qualify for a bond loan.  We have helped many people to achieve this in under a year to 18 months.”

The amount for which the bond applicant will qualify, said van Alphen, may well be smaller than originally anticipated and initially therefore they may have to settle for a less attractive home in a less convenient area than their current rental accommodation.  However, the satisfaction of being on the property owning ladder at last will usually outweigh these difficulties and in five to ten years’ time, if the bondholder has had a regular income, it is likely that he will be able to upgrade to a better house without increasing his monthly bond repayments.

 Asked if these comments apply to first time home buyers, van Alphen replied, “Yes, definitely”.

“First time home buyers, although doing surprisingly well in the current bond market, have often waited far too long before taking the initial step to become home owners,” he said.


  Comment on this Article

  Please login to post comments

Post to my facebook wall
  
2000
Characters remaining


    Latest Property News
    • 20 Jun 2018
      Buying or selling real estate isn’t as easy as it is portrayed sometimes, especially if there is a death of a party during the transaction which can make it awkward, tricky and inconvenient.
    • 20 Jun 2018
      With interest rates remaining at historic lows and banks continuing to compete for mortgage finance business, first-time buyers with funds at their disposal are currently well-placed to gain that initial foothold on the property ladder, particularly in the light of the slightly lower growth rates currently experienced in residential property values.
    • 20 Jun 2018
      The average size of bond granted in SA has grown 7,7% in the past 12 months to R934 000, according to BetterBond, the country’s biggest bond originator.
    • 19 Jun 2018
      In the current market, letting out a property can be a good option as rental demand remains strong, especially in the northern suburbs of Johannesburg. This is according to Chris Renecle, MD of Renprop. However he says that before homeowners let their property out, there are five key points they should make sure are covered before they market the property for rent and sign any lease agreements.
    • 19 Jun 2018
      The Capetonian dream is to live by the ocean with the iconic mountain making an appearance somewhere in the horizon. But, that dream comes with a hefty price tag that many simply cannot afford. But, should you venture some kilometres out of the city centre, entirely new realms of beachside bliss await you …
    • 19 Jun 2018
      Douw Steyn, one of the richest men in the country, recently allowed a rare glimpse into his Fourways Palazzo when it was featured on the SABC lifestyle programme Top Billing - and it is beyond your wildest dreams!
    • 18 Jun 2018
      Many home sellers are motivated to appoint estate agents because they know that the agency will carry the costs of advertising and marketing their property.
    • 18 Jun 2018
      When a property is sold when it has a tenant in occupation, the questions often raised are: “What happens to the tenant if the landlord sells the property?”, and what rights the tenant will have with regards to cancelling the lease or enforcing it, says Sunell Afrika, rentals manager for SAProperty.com.
        
    X
    Subscribe to the MyProperty Newsletter

    Name  
    Last Name  
    Email Address  
    Email Frequency
    select
    X
    Share this Page

       
    For Sale Property
    Rental Property
    More Options
    About
    Connect with us
    FEEDBACK