CityPress - - Business -

IRe­becca writes:

am a 36-year-old pro­fes­sional and sin­gle mother of two. I had planned that this would be the year I’d buy my own mod­est home. I have been lis­ten­ing to fi­nan­cial ex­perts on TV say­ing that first-time home buy­ers must de­lay buy­ing due to the econ­omy. How­ever, I feel that wait­ing is not an op­tion for me. Be­sides, I have not seen prop­erty prices de­clin­ing in a long time, if ever. If I wait, I risk never be­ing able to own my mod­est dream home in a good lo­ca­tion. I do not want to com­pro­mise on the lo­ca­tion of the prop­erty, as it is very im­por­tant to me.

I earn R25 000 a month and save R3 000 ev­ery month into an RSA Retail Sav­ings Bonds ac­count and have saved R110 000. I have a good credit rat­ing. Would it be wise for a per­son in my in­come bracket to buy prop­erty now?

Tommy Nel, head of credit at FNB Home Loans, replies:

The de­ci­sion to buy a prop­erty should start with whether you can af­ford the ask­ing price and what the im­pact of ris­ing in­ter­est rates would be.

I would al­ways ad­vise po­ten­tial home­own­ers that, when con­sid­er­ing an in­vest­ment into prop­erty, one should al­ways do so on a long-term ba­sis.

Try­ing to time the prop­erty-price growth cy­cle is not re­ally that rel­e­vant if one has a re­ally long-term in­vest­ment hori­zon, es­pe­cially if you con­sider the emo­tional ben­e­fits of hav­ing a home that you can call your own.

While a drop in house prices can never by ruled out com­pletely, and some chal­lenges are def­i­nitely ly­ing ahead for South African con­sumers, as long as you can still make your monthly bud­get work if in­ter­est rates in­crease by 1% to 2%, I would un­re­servedly rec­om­mend that you com­mit to en­ter­ing the prop­erty mar­ket.

It is still con­sid­ered fairly un­likely that prop­erty prices will drop in nom­i­nal terms in the next year or so, and, even if they do, on a 20-year-plus ba­sis it is re­ally not that rel­e­vant.

It may well be that a bet­ter buy­ing op­por­tu­nity could present it­self in six to 12 months as fur­ther in­ter­est rate in­creases stress some home­own­ers, but again it is not al­ways pos­si­ble to pre­dict th­ese things with a great level of cer­tainty. If you feel that you can af­ford the mort­gage re­pay­ments even if in­ter­est rates were to in­crease, then per­haps now would be a good time to take the leap into home­own­er­ship.

How­ever, it is im­por­tant to up­date your bud­get for any ad­di­tional costs re­lat­ing to home­own­er­ship com­pared with rent­ing.

I would rec­om­mend do­ing a bud­get start­ing with in­come, less all the ex­penses that you would have as a home­owner. You must re­mem­ber costs such as home­owner’s in­sur­ance and rates and taxes, which you would not have had to carry as a ten­ant.

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