Renting becoming more attractive than buying - index

Cape Town - Consumer Price Index rental figures continue to show the residential rental option is broadly becoming more attractive compared to the relatively expensive home buying option, John Loos, household and property sector strategist at FNB Home Loans, said on Tuesday.

The residential price-rent ratio in January was a mere 13.01% below the January 2008 level - and the January 2008 level is believed to have been at or near a multi-decade high. The price-rent ratio, therefore, remains high, he pointed out.

Whereas the year-on-year actual rental inflation rate was 5.2%, the average house price inflation rate in the FNB House Price Index was still higher at 6.5%.

"What keeps home buyer numbers high at this stage, therefore, is a relatively low prevailing interest rate level, which translates into a far lower level in the instalment repayment on the average priced home/rent index," said Loos.

In January, this index was 35.4% lower than the level at January 2008, having been driven sharply down by big interest rate cuts around 2009.

"However, more recently this index has also risen, by 15.3% since a low in September 2011, therefore, also making the home buying option gradually less attractive relative to the rental option," he said.

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