select
|

Should you buy or rent a home?

A question which often arises is ‘should I rent or should I buy?’ This is obviously a very broad and potentially multifaceted question but factors that influence this decision can often include the individual’s personal financial circumstances - in other words, individuals decide to rent because they cannot afford to buy. In addition, there may be other personal influencers such as employment status and prospects, family composition, lifestyle preferences, hobbies and activities that play a role says Dr Andrew Golding, CE of the Pam Golding Property group.

“Generally speaking, within South Africa, there is a strong culture of owning and the desire to own one’s own home both from an investment as well as a lifestyle perspective, and so this continues to be the dominant trend. However, in recent years the rental market has benefitted from the ever increasing number of people who are unable to buy homes for whatever reason and this market is particularly strong at present, fuelling a buoyant rental market characterised by stock shortages around the country.

“Other perceived advantages of renting include the flexibility that renting offers, in being 'locked into' a property for a relatively short period of time. It is easier to extricate oneself from a lease and relocate - than having to sell before being able to move. This makes the rental option ideal for contract workers relocating nationally or internationally.”

"It's essentially a question of one's own financial situation and requirements rather than a case of one versus the other,” concurs Laurie Wener, MD for Pam Golding Properties in the Western Cape Metro Region. If you can afford it then it is certainly preferable to purchase your own home as this has always proven to be a sound medium to long term investment, and remains so. This is despite the fact that there may be some dips in the capital growth of the property along the way, depending on economic trends. Added to this you would immediately be able to start enjoying all the lifestyle and other benefits of owning your own home, even if it really only starts to appreciate in value in six months to a year from an investment perspective.

With interest rates historically still low, despite a modest increase, is now the time to buy? Says Carol Reynolds, PGP’s area manager for Durban Coastal: “I always believe that buying is first prize and the sooner you can get into the property market the better. One option to consider is to rent your family home, but then invest in a more affordable entry level apartment which can then be rented out as an investment in order to get your foot into the market. In this way you will enjoy a monthly income stream as well as capital growth on your investment over the longer term.

“If you compare the costs of a rental property with monthly repayments on a loan, on average, rental returns are about 0.5 percent of the purchase price. So if you require a bond of greater than 50 percent, your bond instalments will be higher than the rent you would pay for the same property. The ultimate reward is that your monthly bond repayments translate into ownership of your own home, which will appreciate in value in the medium to long term. My advice would be to secure a small investment and earn rental income from that, and perhaps rent a larger home as a dwelling.”

Advantages of renting 

From a tenant's perspective there are various reasons why one may choose to rent as opposed to buy, and not related only to affordability, says Dexter Leite, rental manager for Pam Golding Properties in the Western Cape Metro Region. "Many people want the flexibility that renting offers – a good example being expatriates who have been out of the country for an extended period during which their specific needs may have changed considerably eg financial status, marital status or place of employment.

“They may also find that the South African cities they lived in previously have changed substantially with new infrastructure affecting commuting options, or new business hubs being developed where they may wish to work. For these returning expats it can be beneficial to first rent for a term while they assess what their new requirements are, consider different suburbs where they may wish to settle and gain a feel for commuting times etc. Renting affords them the flexibility to make such decisions without pressure."

Leite says renting is also a good longer-term option for those who may be returning to the country but unsure regarding what they are going to do or where they are going to work. For example, if there is a possibility that your career path may take you to another city, then it makes sense to first rent until you have a clearer idea of where you are going to settle. This also applies to those relocating to different cities within South Africa's borders.

"Buying a property is a major, costly and long-term exercise with many factors affecting the type of property one buys and its location. If you get a key element such as location wrong, it can be a difficult, expensive and time-consuming mistake to remedy – which is not the case with a rental property. When you consider it renting a home is cheaper than buying as you don't have to tie up your capital in deposits, costs, transfer duties and bond repayments. This capital can then be employed in other opportunities, such as business or other investment opportunities. Rates and other property taxes and insurance of the property are also for the owner's account, as well as for the most part, ongoing maintenance and repairs.  For the owner or landlord the benefits are having an asset that appreciates over the medium to long term. The cost of the investment can be leveraged, enabling a larger investment with only a deposit required. It is of course essential to do one's sums taking into account all costs, type of property in demand in a specific area, vacancies and so on," says Leite.

Further useful advice from Leite is to ensure that you have a written lease in place covering the period, the conditions of a possible extension, the rental and escalation, the landlord and the tenant’s responsibilities and obligations . Ensure that all material aspects are negotiated, agreed and enshrined in the lease - you have one chance at this, so if anything is agreed such as, that the premises be repainted prior to tenancy, have it recorded in the lease. Keep the property in good condition and honour all tenant obligations, including paying the rent timeously.


  Comment on this Article

  Please login to post comments

Post to my facebook wall
  
2000
Characters remaining


    Latest Property News
    • 20 Apr 2018
      Whenever changes in the political ecosystem of a traditional property market create uncertainty, smart investors begin to look elsewhere for new opportunities. Property experts at IP Global have analysed the trends and crunched the numbers to find new markets to explore in Europe and the United States.
    • 20 Apr 2018
      Energy and water self-sufficiency are increasingly important factors in home buyers’ choice of property – especially in Cape Town where the extreme drought of the past few years has made municipal supply costly as well as uncertain.
    • 19 Apr 2018
      During the last decade, rampant development has progressively transformed Cape Town’s property landscape with densification being the order of the day, but there are still one or two hidden gems like Scarborough which have retained their original character, offering an inimitable lifestyle and an attractive investment opportunity.
    • 19 Apr 2018
      The rental market is a cut-throat sector of the real estate market that waits for nobody. According to Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, first-time renters need to be fully prepared before they even start the process of looking for a place to rent in order to avoid the disappointment of losing out on their ideal property.
    • 19 Apr 2018
      Choosing to buy your first home instead of continuing to rent is a big decision that will usually take some time to put into action, but the sooner you can save up a sizeable deposit, the closer you will be to reaching your goal.
    • 18 Apr 2018
      Selling your home is no small task and as you will quickly find out, there are a lot of misconceptions about the process. Gerhard van der Linde, Seeff's MD in Pretoria East lists the top 5 misconceptions when you are selling your home.
    • 18 Apr 2018
      The Cape Town municipality is now installing water-management devices at properties that have been non-compliant with the new level 5 water restrictions and there are talks of fines between R5,000 and R10,000 for households that use too much water.
    • 17 Apr 2018
      The recent interest rate cut has stoked the coals in the first-time buyer’s market. At least for the next two months until the next interest rate announcement, homeowners are guaranteed lower monthly instalments than in the previous quarter. But, is it wise to take out a 100% bond just to enter the property market while interest rates are low?
        
    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