There are two mindsets when debating homeownership versus renting, and when weighing up which is best there are many pros, but just as many cons.
When deciding whether to purchase a home or rent indefinitely, it often pays to evaluate one’s full lifestyle and finances carefully, as it might be established that one is wholly better for a particular person, says Nelio Mendes, marketing manager at SAProperty.com.
For example, a person could argue that owning a home is investing in one’s own future instead of paying off someone else’s bond, thereby creating a stable living environment and putting cash into a solid investment. If a person works for a global company, however, which could mean they have to travel a lot, or possibly transfer from country to country on short notice, would renting not be better for that person?
Then there’s the upkeep of owning a property, 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, as well as the logistics of arranging these, usually with a rental agent’s help, says Mendes.
“In many instances, renting often ‘gets more house’ for your money, but the tenant cannot make that property fully their home. They cannot renovate or change things without the landlord’s permission, nor would they want to spend money improving a house that is not theirs,” he says.
Another 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 they have been a good tenant and want to stay on.
“Owning one’s own home ensures that 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,” says Mendes.
At present in South Africa, property is increasing in value at an average of 4.1% per annum, according to a recent Lightstone report, but some areas are better investment options than others.
The same report states that “Over the past couple of months the market activity has stabilised in the 3% to 8% range following a slowdown in recent months as shown by the provincial indices. This is true for most of our indices except the Western Cape, which is currently growing at an unmatched 10.5%, and the optimistic Mpumalanga breaking above this range.
The inland municipalities Ekurhuleni, City of Tshwane and City of Johannesburg metros are growing stably at rates between 2% and 5% whereas the coastal municipalities are generally performing above this range.”
If one were to rent and invest in shares or funds, the growth might be more on riskier investments and less on the more stable funds, but there is also a risk of losing much if there is a bad investment, or in the case of offshore funds, the exchange rate changes dramatically.
Another point in favour of buying instead of renting is that monthly bond repayments will not increase yearly, the only increase is if there is a rise interest rates, as one’s rent often does - often by 10% or at least the inflation rate. Again, all this money will be going towards someone else’s investment, and not one’s own, says Mendes.
“Whichever is chosen, buying or renting, the crux is to choose something within the proper budget range, and not overextend your finances in any way. It is better to live in a smaller home with low maintenance costs that run a household with high overheads and be burdened financially,” he advises.
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