select
|

Buy young and build wealth

Many people only start thinking about home-ownership when they are ready to “settle down” or start a family, which is why first-time buyers these days are generally in their mid-30s, compared to those in the previous generation who were usually in their mid-20s.

“But it can really pay to get a start in the property market much sooner,” says Gerhard Kotzé, MD of the RealNet estate agency group.

“In fact, the earlier you begin the journey, the better. Young people who start a first job do of course have to budget carefully to cover all their bills, but if they are paying rent for accommodation, they should seriously consider the benefits of buying a home instead.”

The first of these, he says, is that buying a home is an investment in an appreciating asset. “This means that the value of the property will steadily increase and that owners who sell after a few years can confidently expect to show a positive return on their investment.

“According to the latest research by property data company Lightstone, the average period of ownership among first-time buyers is 12 years, and after that period, owners will usually also have paid off a substantial portion of their bond and generated ‘equity’ in their home that can either be added to their profit on resale or used to fund other investments.

“Building this equity by repaying your home loan each month is effectively the same as putting money into a savings account and getting paid interest at whatever your home loan interest rate is - which is usually a better rate than the banks pay on savings - and tax-free.”   

Kotzé also notes that the longer buyers stay in their own homes, the more cost-effective ownership becomes when compared to renting. “Rents generally keep rising at around the rate of inflation every year, and after a few years of higher and higher rent you will not have anything to show for it. You just move out, leaving the property behind, and might even have to pay an additional amount to restore the property to its original state.

“Bond repayments, on the other hand, are influenced only by interest rates, which tend to change by much smaller percentages and less often. And even when interest rates do rise, part of every month’s bond repayment still goes towards reducing the outstanding capital portion of your home loan and building up your personal wealth.”

Property ownership also brings benefits such as security, stability, privacy, and the freedom to control your own environment, he says. “Renting doesn’t usually come with a lot of options for modifying or upgrading the property to better suit your changing needs. And if pleading with your landlord for approval doesn’t work, you may have no choice but to move home, and incur all the costs which that entails.

“Home-ownership means you can decide what improvements to make to your property, and reap all the benefit of the value these add in both personal and financial terms.”

In return for this freedom, however, home-ownership does imply more responsibilities than renting, says Kotzé. “Being your own ‘landlord’ means you are responsible for maintenance, repairs, insurance and levies as well as municipal rates and taxes, for example, and these monthly costs do have to be taken into account when you calculate how much you can afford to spend on buying your own home.

“Even this has benefits, though, because covering all these costs and paying all your bills on time while also paying off a home loan is a great way to build up a healthy credit record from a young age.”


  Comment on this Article

  Please login to post comments

Post to my facebook wall
  
2000
Characters remaining


    Latest Property News
    • 22 May 2018
      According to Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, dealing with some sort of neighbour dispute is an unavoidable part of life unless, perhaps, you choose to live on a remote small holding for the rest of your life.
    • 22 May 2018
      Buyers feel that they are getting value for money in the Northcliff area without having to compromise on aesthetics and amenities
    • 21 May 2018
      Secure living is one of the growing property trends in South Africa and Nooitgedacht Estate in Stellenbosch certainly ticks the right boxes for buyers who want a secure, exclusive lifestyle in one of the Boland’s most sought-after estates, says Pam Golding Properties.
    • 21 May 2018
      As the impact of technology on the real estate industry becomes more significant, it is clear that there is a need for an objective look at not only traditional real estate models but also online and other alternative low-commission real estate agencies, to examine what they offer and what their impact might be.
    • 21 May 2018
      With sectional titles growing in popularity, an increasing amount of homeowners simply do not have the garden space to install a tool shed in their backyard.
    • 18 May 2018
      Home improvements are a great way to add value to your property, but not all of us have bottomless pockets for a full-on renovation. Lucky for us, there are plenty of affordable DIYs that can spruce things up over a free weekend.
    • 18 May 2018
      The need for large office spaces is slowly eroding as more and more employers choose to allow their staff to work remotely. As a result, the home business model has grown in popularity, with many new entrepreneurs choosing to start their business from home rather than in a business district. But, what are the legal implications of operating a business in a residential area?
    • 18 May 2018
      Proxi Smart Services Pty Ltd, a company that deals with the day to day administration of property transfers while the conveyancer attorneys perform the legal side of transfers, lost its bid for the court to allow them to do business in this regard.
        
    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