SA has an excessive obsession with property ownership.

This view is politically-driven and puts pressure on financial institutions to create solutions for households that can’t necessarily afford a house.

It shifts rental accommodation to the background while it is the ideal solution for prospective buyers until they can afford their own house.

Large percentages of the populations in foreign countries rent their accommodation.

Erwin Rode, property valuer and economist at Rode & Associates, says the fixation with property is a pity. There is nothing wrong with renting until the right house becomes more affordable.

He says between 60% and 70% of the population in Germany rent their accommodation. It is an indication that they are not investing their money in a roof over their heads, but in assets that are generating an income.

He says it is at this stage cheaper to rent than to buy and the residential market won’t be a good capital investment over the next five years.

To illustrate this point he uses the example of the investor who buys a middle class house at market value and then lets it.

“The expected net income returns will be more than 4%.”

In comparison, an A- grade office will deliver a net income of 9%. He says the difference of 5 percentage points shows that houses are incredibly expensive.

“For a house’s income return to rise to 9%, prices will have to dip or rentals will have to increase significantly.”

Government wants banks to provide home loans to people earning between R3,500 and R8k per month.

These households are typically too wealthy for a subsidy house, but too poor to qualify for financing and are known as the “between market”. Their income makes it impossible to buy even the cheapest new house – R240k – in the “affordable housing” segment of the market.

Housing and Human settlements Minister Tokyo Sexwale held recent meetings with the head of finance institutions to discuss the way forward. This entails the creation of a joint task team to investigate financing and develop innovative ways to utilise the Guarantee Fund of R1bn.

This fund was announced by president Jacob Zuma in his State of Nation address this year as a lifebuoy to the between market. “Those who will benefit from it include nurses, members of the police force, office workers and government officials,” he said.

However, he emphasised that financial caution is of the utmost importance and it shouldn’t lead to irresponsible lending practices. – Elma Kloppers, Sake24

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