Those who choose to take a 'time out' from buying property may well regret the decision down the line.
I have a friend who has been vacillating whether to go and live overseas for the past 10 years. Because of his indecisiveness, he chose to rent rather than buy. However, Brexit as well as the various terrorist attacks which have taken place in Europe (he was planning to settle in France) have impacted on his decision and he has now decided to bite the bullet and buy a home in South Africa.
While we, his friends, are all thrilled to hear that he's staying put, he's not that happy with himself mainly because he hasn't kept track of property prices in the area in which he lives and now realises that it's unlikely he’ll be able to afford a home in that suburb because while he was dreaming of eating Brie and cruising down the odd French canal, property prices have been steadily rising in this country.
What's more concerning to him, however, is the money he has wasted renting a home during this time. The rent he has been paying has gradually increased over time and while he started off paying R8000 a month for a freehold home in Somerset West, this has now risen to over R15 000. Working on an average of R10 000 a month this means that he has handed over well over a million in rental payments to his landlord during this time period.
People have varying reasons for not investing in a home, most citing financial issues, including not being able to raise the money for a deposit. There are also those who prefer to rent something that they would never be able to buy, as well as those, like my friend who, for whatever the reason, simply aren't ready to settle down. However, the decision is going to end up costing a fortune and unfortunately the tenant isn't going to have anything to show for all his financial input by the time he wakes up and realises his mistake.
So, just how much has property risen in recent times. Lightstone statistics indicate that the average freehold property in Somerset West sold for R640 000 in 2006, the same type of property now attracts an average price of R1.6m. A freehold home in Umhlanga Rocks would have set you back by around R2.9m 10 years ago. Today buyers will pay an average of R4.9m for the same privilege. A home in Bryanston would have cost you an average of R2.4m back in 2006, today you will be paying in the region of R4.5m.
Before you all start to shout that the prices have risen so much because these are high end areas, think about this.
A home in Crystal Park in Gauteng would have cost you around R460 000 back in 2006, a freehold home in the suburb is now going to cost an average of R720 000. Likewise, a home in New Germany in KZN would have cost in the region of R700 000 back then, this has risen to R920 000 today. In the Cape a freehold home in Parklands that would have set you back by roughly R780 000 in 2016 will now cost, on average, R1.2m.
Experts have long been telling us it's far better to buy than to rent, but they would, wouldn't they, because most have a vested interest in the real estate industry. Actually, the reason they are so passionate about investing in property is because they have a thorough understanding of how the property markets work and why it's always a better option to buy now rather than later.
Don't take our word for it, do the maths and work out how much you will be paying your landlord for the privilege of living in something you will never own over the long term. Take stock and make a decision, and even if it means moving in to a smaller place, consider the benefits of owning as opposed to renting.