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To Rent Or To Buy – That Is The Question


To Rent Or To Buy – That Is The Question

The decision to rent or buy a residential property in South Africa hinges on several factors. It's not a one-size-fits-all situation. Your current life stage, financial situation, and personal circumstances all play a crucial role. Paul Stevens, CEO of Just Property, looks at the options and weighs up the pros and cons.

Many South Africans dream of owning their own homes. The sense of pride and the ability to build equity by paying off a bond holds significant appeal. Yet, renting offers flexibility and convenience that better suits certain periods in our lives and certain lifestyles. Ultimately, the choice boils down to your individual needs and priorities, but let’s take a deeper dive.

The Rental Option: Advantages and Considerations

For many South Africans, renting provides a secure and comfortable living situation without the immediate commitment of homeownership. Renting avoids the significant upfront costs that buyers face, such as deposits, transfer duties and bond repayments. Additionally, renters are relieved of the responsibility for rates, taxes, insurance, maintenance, and repairs, freeing up resources for other priorities. For these reasons, renting is appealing to families establishing themselves in a new city, those with fluctuating incomes, youngsters at the start of their careers and contract workers who move from place to place.

Affordability and the Savings Advantages

The biggest advantage of renting lies in its affordability. By strategically choosing a rental property below your maximum budget or sharing with housemates, you can unlock significant savings potential. While these choices might involve some discipline and effort, they are smart sacrifices that pay off in the long run. If your dream is to own a home one day, I strongly recommend that our tenants look to the future and, for a few years, focus on building up a deposit so they can buy their own home one day.

Discipline is Your Ally

Develop a strict savings plan and allocate a predetermined portion of your income specifically towards your homeownership goal. Remember, discipline is key. Treat your savings like a fixed expense, as important as rent or groceries. It’s also a good idea to consult a financial advisor about crafting a personalised savings and investment strategy that will consider your risk profile and accelerate your path to homeownership.

Far from being a financial dead-end, renting can be a launchpad for future homeownership. This approach allows you to build your financial security while enjoying the flexibility and convenience that renting offers during your young and adaptable years.

The Benefits of Owning a Home

The residential property market is subject to economic fluctuations; however, purchasing a well-located property remains a sound long-term investment that can offer resilience even during economic downturns.

Generating Wealth: Location and Leverage

Property ownership offers another significant advantage: the ability to leverage your equity for future endeavours. Owning a substantial asset can unlock financing options when you require a larger or more expensive home. This highlights the importance of choosing the right property from the outset.

I advise our first-time buyers to buy a modest property in a great suburb with a history of stable value growth rather than fall for a larger home in a less established area. Remember, your first home can be a stepping stone to a property portfolio. 

As your financial situation improves, you can "trade up" to a larger home to accommodate growing families or evolving needs. And if you again buy prudently, you could retain your starter property as an investment. This strategy can generate capital growth over time and provide valuable rental income that can assist with future bond repayments. 

With good advice from an agent who understands the buy-to-rent market, you can slowly build a property portfolio that will generate a steady income stream for your retirement and secure assets to leave to your children.

Beyond the financial advantages, owning a home unlocks a unique set of lifestyle benefits. You can personalise the space to your taste, invest in improvements that enhance your comfort, and enjoy the stability of having your own place. 

Apartments vs Sectional Title Homes

While your dream may be to own a stand-alone home, apartments and sectional title homes often present attractive entry points for first-time buyers and young professionals. Here's a breakdown of both options to help you choose the one that best suits your lifestyle and priorities:

  • Sectional title ownership is typically associated with townhouses, apartments, and some cluster developments. In this structure, you own the interior of your unit, including the walls, floors, and ceilings. The exterior of the building, the land it's built on, and common areas like pools, gardens, and hallways are jointly owned by all homeowners through a Body Corporate.

    Advantages: Many sectional title developments offer security features like controlled access and on-site security personnel. Upkeep of common areas is shared among all homeowners through Body Corporate levies. Sectional title properties can often be more affordable than freehold homes and may offer access to amenities you may not be able to afford to add to a freehold home, such as a swimming pool.

    Disadvantages: Sectional title comes with Body Corporate rules governing everything from exterior aesthetics to noise levels. You're financially responsible for the Body Corporate's debts and potential shortfalls. Living in close quarters with neighbours can have its drawbacks, particularly if noise or privacy is a concern.
  • Freehold ownership grants you complete ownership of the land and everything built on it, offering greater autonomy and control over your property.

    Advantages: Unless your home is part of a development with a homeowners' association, you have the freedom to renovate and alter your property as desired, subject to municipal regulations. Freehold homes generally offer more privacy. It is also generally easier to enjoy the companionship of pets in a freehold home.

    Disadvantages: You're solely responsible for rates, taxes and insurance, as well as all maintenance, repairs, and improvements to the property, which can be costly and time-consuming. The condition of your neighbours' properties can impact your property value. Freehold properties generally require more individual security measures compared to secure complexes.

By carefully considering your priorities – from the desired level of control to the cost and responsibilities of maintenance – you can choose the ownership structure that best aligns with your long-term goals and lifestyle.

Informed Decisions

The decision to rent or buy ultimately rests with you. Do your research and make choices that are aligned with your specific life situation, but keep your long-term goals in mind always. Consulting a trusted property advisor with expertise in both buying and renting will help you make an informed decision that sets you on the right path towards your housing goals.

Author Just Property
Published 10 Apr 2024 / Views -
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