If you are still on the fence about whether it is better to buy or rent a home, here’s some good news that could help you make up your mind.
Research by Compare The Market shows that there is often little difference between paying the bond on a home that you can call your own, and paying the monthly rental on a property of the same value. In fact, South Africa is ranked first in the world when it comes to competitive bond prices. Only Finland and Italy outperform SA with a negative ratio, as it is marginally cheaper to buy in these countries than to rent.
“This study, which reveals that in South Africa there is an average price difference between renting and paying a monthly bond of only 0.81%, underlines the considerable impact of the recent accommodative lending environment on affordability,” says Carl Coetzee, CEO of BetterBond. “Months of record-low interest rates, which saw the prime lending rate hold steady at 7% for more than a year, improved affordability for home owners across all price bands.”
If one looks at TPN data for average rental prices, the difference between the average rent per month for a freehold property in Gauteng valued at R1.2 million is R9 410. The monthly bond repayments on the same property, at the current prime lending rate of 7.5%, is R9 667. This difference of just R257 between renting and owning is equivalent to the cost of one outing for a family of three to the cinema, says Coetzee. The Australian report estimates South Africa’s average rental nationally to be about R12 851, and the average bond repayment to be R13 091 a month. This results in a monthly difference between renting and owning of R240.
“With improved affordability, we have seen an uptick in buyer activity in recent months,” says Coetzee. BetterBond reported a 8,43% increase in bond registrations for the 12 months ending January 2022. With the start of the gradual increase in the prime lending rate, there has been a shift, with much of the buyer activity stemming from repeat buyers and those less sensitive to interest rate changes, says Coetzee. “There’s currently increased activity at the upper end of the market, with more formal grants for bonds of over R3 million than for bonds of R2 million to R3 million. Just over 6.6% of BetterBond’s grants for the 12 months ending January 2022 were for bonds of upwards of R3 million - an increase of 44% from the previous year.
FNB reports that for the first nine months of 2021, the average mortgage size approved was approximately 16% higher and the average property size approximately 6% bigger, compared to the same period in 2020. “BetterBond’s average approved bond size increased by 11.17% for the 12 months ending January 2022, with the average home purchase price increasing by almost 11.5%,” says Coetzee.
“We expect bond activity to remain buoyant, despite a projected repo rate increase of 100 basis points for the year, according to FNB,” says Coetzee. “Much of this will be driven by the middle-to-upper price buyers who have access to credit and who are wanting to move to accommodate a work-from-home lifestyle. For these buyers, the benefits of owning instead of paying monthly rent will remain pertinent.”
