Weekend Argus (Saturday Edition)
Own property or be forever a tenant?
Industry experts spell out pros and cons of having your own home versus renting
IT MAY seem to be a no-brainer to many that if you face a choice between buying a home or renting one, you’d buy.
South Africans have a tradition of owning their homes, but there also is a growing number of locals who are renting.
This worldwide “Forever Renter” phenomenon sees many people in other countries, notably the Netherlands, rent properties their entire lives.
In South Africa, economic pressures on households are seeing a squeeze on property ownership, meaning the rental option does become more popular, says FNB economist John Loos.
“In many instances it is still the cheaper option in the short term, given the big transfer costs involved with buying a home. (SEE RIGHT)
“Renting can also give people more certainty over home- related cash flows, because many of the surprise maintenance costs are the responsibility of the landlord.
“It also allows for greater mobility if you are uncertain about where you are going to be working or living in the not too distant future.
“Buying and selling homes frequently, with all the transaction-related costs, can lead to big losses.”
Renters are not only young students. In fact, data shows renters are also professionals over 30, and are often also over 40 renting after a divorce.
Factors that influence the decision to rent or buy include the individual’s personal financial circumstances.
People usually rent because they can’t afford to buy, says Dr Andrew Golding, chief executive of the Pam Golding Property group.
Other personal circumstances can also play a role, such as employment, family composition, lifestyle preferences, hobbies and activities.
“Generally speaking in South Africa, there is a strong desire to own one’s own home both from an investment and a lifestyle perspective, so this continues to be the dominant trend.”
In recent years, however, the rental market has benefited from an increasing number of people who are unable to buy homes for whatever reason, and this market remains very active.
It is also fuelled by a younger generation of singles, couples and families who are financially not yet in a position – or able to raise sufficient finance – to purchase their first home.
How might expropriation without compensation affect the number of people willing to invest in property?
At this stage it is difficult to assess, says Richard Day, group general manager for Pam Golding Property.
“Given that there is still a comprehensive process to follow, including public comment, it is hard to draw any direct relationships between changes in property values and the discussions around land expropriation without compensation. Until the matter has been finalised, any conclusion would be speculative.
“For the same reasons, until there is finality, any opinion on the areas and types of property to be affected or least affected would be speculative.”
One of the arguments for owning your home is that you are investing in your own future instead of paying off someone else’s bond, says Nelio Mendes, marketing manager at SAProperty.com.
This means you are creating a stable living environment and putting cash into a solid investment.
“But for a person who works for a global company, which could mean they have to travel a lot, or possibly transfer from country to country on short notice, renting might be better.
“In many instances, renting may get you more house for your money, but you can’t make that property fully your home.
“You cannot renovate or change things without the landlord’s permission, nor would you want to spend money improving a house that is not yours.”
If you own your own home the upkeep is to your account, which can be expensive and a lot of physical work, whereas it is the landlord’s responsibility to carry the costs of maintenance or repairs on a rented property.
“A drawback of renting is that the owner might decide to sell or not renew the lease, which then forces the tenant to move, even if he or she has been a good tenant and wants to stay.
“Owning one’s own home ensures you can live in it for as long as you pay your bond and can afford the upkeep.
“Many who buy a home look to live in it for the long term, possibly while their children are at school and university, and would possibly even leave it to their heirs.”
Attorney Meyer de Waal, a founding member of the Attorney Realtor Hub, says he is on a “mission” to promote home ownership.
“Purchasing a home will most likely be the biggest investment decision anyone will ever make, and it’s a decision that comes with specific financial obligations.
“However, once you appreciate the benefits of home ownership, you will no longer see obligations such as repaying your loan or maintaining your home as a burden, but rather as a route to investing in your and your family’s future.”
Golding says: “The question of whether to rent or to buy is essentially one of the individual’s own financial situation and requirements rather than a case of one versus the other.
“If you can afford it, then it is certainly preferable to purchase your own home as this has always proven to be a sound medium-term to long- term investment – and remains so, despite the fact that there may be some valleys as well as peaks in the capital growth of the property along the way.”