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The main driver remains affordability, and in an economic downturn, rental demand tends to spike.
When household budgets are under pressure and home loans may not be affordable or attainable, renting is often the cheaper, or only, alternative.
Buying
“In South Africa, there is a strong culture of owning; desiring to own one’s own home both from an investment as well as a lifestyle perspective and this continues to be the dominant trend,” says Dr Andrew Golding, CEO of the Pam Golding Property group. But buyers need to be reasonably certain that the property is one in which they want to live for some time. “Buying and selling a house every year or two, with a very low capital growth environment, brings with it big financial costs,” cautions John Loos, household and property sector strategist at FNB Home Loans.
BENEFITS:
- Acquiring an asset: “The benefit of owning a home is that it is a driver of financial discipline. You have this contract with the bank that you have to honour and when you have paid off that debt you have an asset that is worth something,” says Loos.
- It’s yours: You can do what you like with your own home.
- Stability: You can determine when it is you want to sell and leave.
- Equity potential: Value-adding improvements potentially create additional equity in your property.
DISADVANTAGES:
- Hefty purchase costs (see “Hidden costs of buying property” box on page 13).
- Maintenance costs.
Renting
“One of the major reasons for renting is that many people do not have the capital to put down a deposit and pay for the transfer duties,” says Trafalgar Property Group’s MD Andrew Schaefer.
The biggest demand for rental accommodation tends to come from the middle and lower income sectors where affordability is vital, says Seeff chairman Samuel Seeff.
“Affordable areas and properties that are in close proximity or have good access to main arterials, schools and other facilities tend to be most in demand.”
In recent years the rental market has benefitted from the ever-increasing number of people who, for whatever reason, are unable to buy homes and this market is particularly strong at present, Golding tells Finweek.
BENEFITS:
- Flexibility & mobility: “It’s easier to extricate oneself from a lease and relocate rather than having to sell before one can relocate. The rental option is ideal for contract workers relocating nationally or internationally,” says Dr Golding.
- Testing the waters: Renting is ideal for testing an area and type of property.
- Fixed costs: Cash flow is more stable as unexpected maintenance costs are paid by the landlord.
- Saving to buy: “You don’t have to rent the house you aspire to; you can rent smaller and cheaper and tough it out as long as you need to in order to save for a deposit for your own home,” says Loos.
- Aspirational: If living in your dream home in your preferred location is not achievable within your buying budget, it could be within reach through renting.
DISADVANTAGES:
- You’re paying off someone else’s bond rather than your own and will have nothing to show for all that money spent.
- “Having to move each time the landlord decides to sell can be unsettling,” says Loos.
- It’s not your property so you may have to live with aspects that you would typically change if it were yours.
“Some may say that renting is a better option because you save on transfer costs as well as benefit from cheaper renting costs which you can then save. This may be correct theoretically but in practice, South Africans don’t save. If they do rent, often they are blowing the rest,” says Loos.
