Stay in the rental market or buy?

With 2016 touted as a financially challenging year, many buyers may be hesitant to take the step towards homeownership and are quite content to stay within the rental market for the time being, says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa.

“There will be consumers who will remain within the rental market because they are worried about the country’s economy and how the factors surrounding the market will impact their financial wellbeing. There will also be those that simply enjoy the freedom of being able to stay in different areas without having to sell a property to relocate. Another group of consumers will stay in the rental market because they financially cannot afford to buy a property that offers them the same features as their rental property,” says Goslett. “Many consumers are eager to buy property, but don’t have the affordability levels or savings to get their foot in the door. With the increased cost of living and interest rate hikes that consumers have endured over the last while, many prospective buyers have been forced to stay within the rental market until their financial situation improves.”

According to statistics from bond originator BetterLife, the average deposit requirement by banks for first-time buyers this year is around 17% of the purchase price of the property. Given the fact that the average purchase price of a home bought by a first-time buyer is around R850 000, consumers have to save between R110 000 and R180 000 just for a deposit, not to mention the other costs associated with buying a home. “With so many South African’s struggling with personal debt, it can make it extremely difficult to save up the required deposit and costs required for a property transaction. Those who wish to improve their chances of getting into the market will need to try and reduce their debt-to-income ratio and start putting money aside as soon as possible,” says Goslett. 

He notes that while the bond approval rate is up to around 74%, there are still large numbers of consumers who are unable to meet bond approval requirements. “The constraints placed on consumers by the increased cost of living will see to it that the rental market continues to thrive.  However, if the interest rate continues to increase it will have a knock-on effect on the price of rentals as investors will have to pay more for any credit they may have,” says Goslett.

Due to the fact that property should be viewed as a long-term investment, some consumers may find it a more viable option to stay within the rental market until they are settled and ready to commit to a particular home and area for the next five to ten years. According to Goslett, if a consumer is undecided about where it is that they would ultimately like to live or want the freedom to be able to relocate to another city unencumbered by the responsibility of homeownership, it is best that they continue to rent.

He adds that on the flipside, an advantage of buying a property is that it is a kind of forced saving, in that the homeowner is placing money into an asset they can sell at a later stage. “According to Reserve Bank figures South Africa has one of the lowest savings rates in the world and it is getting worse. Purchasing a home is a way for consumers to put money aside for the golden years. Selling the property once it has been paid off and downscaling will no doubt offer welcomed financial relief when it is needed most. South Africans that have rented for their entire lives will have no asset to sell. Ideally, if a consumer decides that they are going to purchase a home, it is best to get into the market as soon as possible. The sooner they do, the sooner they will have a paid off asset to work with,” says Goslett.

Irrespective of whether a consumer continues to stay in the rental market or decides to rather purchase a home, there are advantages and disadvantages to both options.  Each consumer needs to evaluate their circumstances and make the best decision that meets their personal needs. “Renting offers the tenant a certain amount of flexibility before they make a long-term commitment, while buying a home can provide the owner with an asset to their name that will certainly show good returns in time to come,” Goslett concludes.

  Comment on this Article

  Please login to post comments

Post to my facebook wall
Characters remaining

    Latest Property News
    • 26 Apr 2018
      Banks are showing an increased appetite to lend according to first quarter (Q1 2018) property statistics recently released by ooba, South Africa’s leading home loan originator.
    • 26 Apr 2018
      Moving into a new home comes with such a long list of expenses that one often searches for ways to cut back on costs. Hiring a professional moving company is one of the first expenses that many buyers tend to try and work around, especially now that purse strings are even tighter owing to the VAT increase that took effect this month.
    • 26 Apr 2018
      Investors looking to buy a property offshore can potentially recoup their money faster through short-term rentals than traditional letting options, all the while earning income in a foreign currency.
    • 25 Apr 2018
      Whether you are a seasoned seller or new to the game, putting your home on the market is an exciting moment. To ensure you get the best possible outcome these 8 value adding additions to your home is worth the effort.
    • 25 Apr 2018
      After four years of unprecedented growth fuelled by semigration, the Southern suburbs market faced a number of challenges in 2017, including dwindling affordability and a marked slowing in house price growth with many sellers forced to lower their prices in order to secure a sale.
    • 25 Apr 2018
      Mall of Africa, is celebrating its second year of sensational success. This splendid super-regional shopping centre first opened on 28 April 2016, and has grown in popularity, performance and profile since then.
    • 25 Apr 2018
      While the role of trustee in a sectional title scheme is a voluntary and unpaid position, it is one that comes with huge responsibility. Trustees have a fiduciary duty towards their scheme, says Chinelle Hewit, Operations Manager at sectional title finance company Propell.
    • 24 Apr 2018
      The thing about the property ladder is that at some point in our lives we all have reason to want to climb a rung or two higher. Sometimes, it’s because we’ve outgrown our previous dream home, or because we want to be in a better neighbourhood that’s closer to work or to schools. Sometimes it’s because our circumstances have changed, and we’re taking care of elderly parents or relatives. Sometimes, it’s just because we want a property that reflects the financial status our hard work has won.
    Subscribe to the MyProperty Newsletter

    Last Name  
    Email Address  
    Email Frequency
    Share this Page

    For Sale Property
    Rental Property
    More Options
    Connect with us