The ear­lier young adults get a foot on the prop­erty lad­der, the better

Weekend Argus (Saturday Edition) - - PROPERTY -

MANY peo­ple only start think­ing about home own­er­ship when they are ready to set­tle down or start a fam­ily, which is why first-time buy­ers nowa­days are gen­er­ally in their mid-30s – 10 years older than the pre­vi­ous gen­er­a­tion.

But it can pay off to get into the prop­erty mar­ket much sooner, says Ger­hard Kotzé, man­ag­ing di­rec­tor of the RealNet es­tate agency group.

“In fact, the ear­lier you be­gin the jour­ney, the better. Young peo­ple who start a first job do, of course, have to bud­get care­fully to cover all their bills, but if they are pay­ing rent for ac­com­mo­da­tion, they should se­ri­ously con­sider the ben­e­fits of buy­ing a home in­stead.”

The first ben­e­fit, Kotzé says, is that buy­ing a home is an in­vest­ment in an ap­pre­ci­at­ing as­set.

“Ac­cord­ing to the lat­est re­search by prop­erty data com­pany Light­stone, the av­er­age pe­riod of own­er­ship among first-time buy­ers is 12 years, and af­ter that pe­riod, own­ers will usu­ally also have paid off a sub­stan­tial por­tion of their bond and gen­er­ated eq­uity in their home that can ei­ther be added to their profit on re­sale or used to fund other in­vest­ments.

“Build­ing this eq­uity by re­pay­ing your home loan each month is ef­fec­tively the same as putting money into a sav­ings ac­count and get­ting paid in­ter­est at what­ever your home loan in­ter­est rate is – which is usu­ally a better rate than the banks pay on sav­ings – and is tax-free.”

Kotzé also notes that the longer buy­ers stay in their own homes, the more cost-ef­fec­tive own­er­ship be­comes when com­pared to rent­ing.

“Rents gen­er­ally keep ris­ing at around the rate of in­fla­tion ev­ery year, and af­ter a few years of higher and higher rent, you will not have any­thing to show for it. You just move out, leav­ing the prop­erty be­hind, and might even have to pay an ad­di­tional amount to re­store the prop­erty to its orig­i­nal state.”

Bond re­pay­ments, on the other hand, are in­flu­enced only by in­ter­est rates, and Kotzé says these tend to change by much smaller per­cent­ages and less of­ten. And even when in­ter­est rates do rise, part of ev­ery month’s bond re­pay­ment still goes to­wards re­duc­ing the out­stand­ing cap­i­tal por­tion of your home loan and build­ing up your per­sonal wealth.

Prop­erty own­er­ship also brings ben­e­fits such as se­cu­rity, sta­bil­ity, pri­vacy and the free­dom to control your own en­vi­ron­ment, he says.

“Rent­ing doesn’t usu­ally come with a lot of op­tions for mod­i­fy­ing or up­grad­ing the prop­erty to better suit your chang­ing needs. And if plead­ing with your land­lord for ap­proval doesn’t work, you may have no choice but to move, and in­cur all the costs which that en­tails.

“Home own­er­ship means you can de­cide what im­prove­ments to make to your prop­erty, and reap all the ben­e­fit of the value these add in both per­sonal and fi­nan­cial terms.”

In re­turn for this free­dom, how­ever, home own­er­ship does have more re­spon­si­bil­i­ties than rent­ing, says Kotzé.

“Be­ing your own land­lord means you are re­spon­si­ble for main­te­nance, re­pairs, in­sur­ance and levies as well as mu­nic­i­pal rates and taxes, for ex­am­ple. And these monthly costs do have to be taken into ac­count when you cal­cu­late how much you can af­ford to spend on buy­ing your own home.”

How­ever, even this has ben­e­fits be­cause cov­er­ing all these costs and pay­ing all your bills on time while also pay­ing off a home loan is a great way to build up a healthy credit record from a young age.

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