select
|

To rent or to buy a house in 2012?

Property economist Erwin Rode said young people will be better off renting rather than buying a home in the next five years. He said residential properties are very overvalued and in massive oversupply.

"It will take many years for prices of residential properties to come in line with their actual value, and South Africans are better off investing the difference between their rental instalments and what they would have paid into a bond religiously elsewhere every month," said Rode.

"One should not be buying with the expectation of capital growth in the short to medium term, considering the current world economic climate and what effect this will have on our local economy. I expect that the developed world could take the next 10 years to recover from its current debt troubles."

However, Rode said that in the current economic environment property is still a wise investment if a buyer has "cash in hand" and is able to buy the property ungeared.

Auction Alliance CEO Rael Levitt disagreed, saying that the current market is a "once-in-a- lifetime opportunity" for first-time homebuyers to enter the market and buy, adding that interest rates are historically low and house prices have come down as well.

"In fact in many markets it is actually cheaper to buy than to rent right now. There is no doubt in my mind that while the housing market may soften a little more we are as close to the bottom as possible and the only trajectory after that is upwards," said Levitt.

"House prices, at one stage, were getting too expensive for new entrants but now all the factors are pointing in the direction to buy. In most suburbs across the country there is great value to be had and new entrants can pick up certain houses at below replacement or building cost. This is a perfect investment environment for entrant buyers who are looking for a home and long-term investment growth," he said.

Nevertheless, Rode and Levitt agreed that commercial properties would probably be the better investment.

"Commercial property which is let with stable tenants on medium-term leases will be the very best of the property market," said Levitt.

He believed that high-end commercial properties will be favoured over the properties in the lower end of the market.

Rode added that investment in industrial and office space is preferable to that of shopping space.

"Office and industrial properties are fundamentally not overvalued and will do well when there is an upswing in the economy," said Rode.

During the first half of 2011, South Africa's property market experienced a tentative recovery, but Rode said that it turned out to be unsustainable. He does not expect a recovery in any property sectors during 2012.


  Comment on this Article

  Please login to post comments

Post to my facebook wall
  
2000
Characters remaining


    Latest Property News
    • 22 Jun 2018
      The rental market in many Johannesburg suburbs has shown encouraging signs of revival this year but it remains a competitive market and landlords who best cater to their market’s needs will reap the healthiest returns.
    • 22 Jun 2018
      Home design is constantly evolving to reflect the changing needs of society. We look at some of the ways in which our use of space is changing.
    • 22 Jun 2018
      While estate agents can help the seller with correctly pricing the property and marketing a property to the right pool of potential buyers, at the end of the day it’s the impression that the property will make on buyers that counts the most.
    • 21 Jun 2018
      Anyone who’s ever been involved in a building project that’s gone wrong will appreciate the importance of adequate insurance cover in the construction industry.
    • 21 Jun 2018
      A recent news story about a blind tenant caught in a legal battle with his body corporate over letters and notices he was unable to read and consequently comply with has raised the question: what are the legal obligations for landlords with disabled tenants?
    • 21 Jun 2018
      A trend that’s taken the world by storm in recent years is that of hygge (pronounced: hue-guh), a Danish concept that is about creating intimacy, connecting with loved ones and taking pleasure in small, ordinary things.
    • 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.
        
    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