A NEW TAKE ON BUY-TO-LET
News > news - 11 Oct 2006

Parents are increasingly stepping in to assist their children on to the

proverbial property ladder by unlocking the increased value in their family

homes - to the benefit of both parties.

Gerhard Kotzé, CEO of the ERA property group in South Africa, says that in

spite of the recent market slowdown, property values now are approximately

double what they were five years ago, and there is enormous equity in many

existing homes.

"By the same token, the rise in property values has placed home ownership

beyond the reach of many young people and our market feedback is that in a

growing number of instances now, parents are re-financing their homes and

accessing the additional equity they have available to buy homes for their

grown children.

"Alternatively they are opting to downsize and use additional funds realised

from the sale of their larger home to acquire additional properties that are

then occupied by their offspring - the idea being that the children will

acquire the property from the parents as and when they can afford to do so,

and quite possibly at a discount to the going market rates at that time.

"Meanwhile the children effectively become "tenants" to the parents, so this

goes beyond the conventional buy-to-let strategy," he notes. "It also means

the parents/ landlords should not have to deal with the usual vagaries of

the rental market with regard to finding or managing tenants."

There are of course some potential problems with such arrangements. "One is

that the relationship between the parents and children has to be very strong

and another is that the children's circumstances may change along the lines

of, say, needing a larger property, being transferred, changing careers or

even emigrating.

"On the other hand, this is a route by which grown children are able to

leave home at an earlier stage than might otherwise be possible, and open up

all manner of options for everyone in the family."

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