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.