Home ownership is once again looking much more attractive than renting

In the last few months the arguments in favour of renting rather buying the residential property in which you live have grown a great deal weaker, says Bill Rawson, Chairman of the Rawson Property Group.

“In the first half of 2013 anyone following the trends in the South African property world would have become aware that there was a growing lobby very much in favour of renting rather than buying.”

“In the second quarter issue of the respected magazine “Personal Finance” for example, Irwin Rode, the property economist, produced a table that showed that on his calculations, an investor buying a R1 million home in which to live would, on a 100% bond, pay out R651,832 in five years. If after that period he then sold, he would make a profit of only R46,532.”

“If, on the other hand, the investor had rented a house of similar value, his rental outlay would have been only R349,969, which, in theory, would have left him with a R374,139 saving which could have been invested profitably elsewhere.”

“There was, of course, much truth in Mr Rode’s view at that time and we all acknowledged it. However, we now have to accept is that in a few short months the pendulum has begun to swing back in favour of home ownership in a very big way.”

The swing back, said Rawson, is due to several factors, but the two most relevant, in his view, are:

1.    Most urban property rents are now rising far faster than they did in the past and the rent today can rise as much as 20%, especially if in the lower income group; and

2.    Price rises are now not in the region 3%, as they were when the Rode’s calculations were made, but are at around 9% and are likely to stay at that level.

From a purely practical side, said Rawson, it has to be recognised, too, that the experience of every single person who has been in property for some years has shown that a commitment to a bond tends to be irrevocable and almost always maintained, whereas the commitment to a saving of so much per month can be, and often is, shelved when financial pressure is felt.

“For this reason alone,” said Rawson, “I will always encourage a young couple to knuckle down and commit themselves to home ownership, especially if it is to be for a longer period than five years – any calculations based on less than a five year period are far too short term to be taken seriously by dedicated property investors.”

  Comment on this Article

  Please login to post comments

Post to my facebook wall
Characters remaining

    Latest Property News
    • 23 Nov 2017
      The Adelphi Centre (now entitled “ARTEM") in Sea Point, Cape Town, is being extensively renovated, and once complete will offer an ultra-luxurious galleria style shopping centre unlike any other seen on the Atlantic Seaboard or in Cape Town.
    • 23 Nov 2017
      If you are looking to sell your home in today’s real estate market, there are certain things that you need to include both inside and outside your house. Today’s generation of home buyers is looking toward a more eco-friendly, energy and water conscious home, and if your house stands out then you are more likely to be able to sell it.
    • 22 Nov 2017
      Most people know of the Community Schemes Ombud Service (CSOS) and that levies must to paid to fund its operations. In this article the experts at Paddocks will address some of the issues that are causing confusion.
    • 22 Nov 2017
      While sales have noticeably slowed in most sectors in most Cape town suburbs, the security estate sector in Constantiaberg has bucked the trend by remaining buoyant, with sales by August this year already surpassing total sales in 2016.
    • 22 Nov 2017
      The end of the year is fast approaching, and so are all the travellers, tourists and holidaymakers. For those who live near or own a property in a holiday-hotspot, the festive season also brings with it an abundance of short-term rental opportunities. Its a great way for property owners to make a few extra rand for their own holidays or to put towards their savings.
    • 21 Nov 2017
      The buying process is over, and the moving truck has delivered your household goods to your new property. Now it’s time to unpack and turn your new house into a home.
    • 21 Nov 2017
      When an offer to purchase a property is signed by both buyer and seller, this constitutes a binding agreement or “Deed of Sale” between the two parties. However, in most cases the “standard contract” might not be enough to cover all the specifics pertaining to the sale. The agreement may require some additions or alterations to clauses, which needs an expert hand in the drafting of such
    • 21 Nov 2017
      As more and more South Africans look to invest in property abroad, Spain is offering them one of the best deals in global real estate.
    Subscribe to the MyProperty Newsletter

    Last Name  
    Email Address  
    Email Frequency
    Share this Page

    For Sale Property
    Rental Property
    More Options
    Connect with us