Advice from the professionals, for those considering buying a home this year.
Even as SA’s economy floundered last year, the real estate market gained many new participants as large numbers of young people, especially, went ahead with their plans to stop renting and buy their own homes.
And in the coming months they should continue to do so, says Carl Coetzee, CEO of SA’s foremost home loan originator BetterBond, “because owning a home is almost always preferable to renting, and if you are going to buy, it is always better to do so sooner rather than later”.
Some of the reasons that people who are renting should embrace home ownership as soon as possible, he says, include the following:
It is better to start paying off your own home, which will become an appreciating asset in your name, than to keep renting, which is effectively just helping to pay off someone else’s property.
The sooner you buy, the sooner you can start generating savings. Paying an additional amount off your home loan each month, for example, will not only help to protect you against any future rate increases but shorten the overall repayment period, and save you many thousands of rands in interest.
It is possible to use your home to earn extra money in the short-term. When you own a property, you can rent out a spare room, garden cottage or storage space, for example, or get a consent-use permit and use some space to accommodate a weekend or home-based business that will bring in additional income.
A home will help you build personal wealth in the longer-term. The value of the property will keep growing while the amount you owe on your home loan keeps decreasing and after a few years, you should be able to use some of this “equity” to pay for a child to go to university, for example, or perhaps to invest in a second property.
The opportunity to customise the property. When you buy a home, you can redecorate, renovate and improve it as you please. You can, for example, install insulation, a solar geyser and rainwater tanks to make it more energy-efficient and eco-friendly, without having to ask anyone’s permission. In this way, you can also further increase the value of the property.
Peace of mind. By the time you are ready to retire, your home will hopefully have been paid off, so you will have complete security of tenure. You will not have to worry about the cost of your accommodation rising, in terms of rent increases, at a time when you may very well be living on a fixed income. Alternatively, the equity you have built up in your own property and the profit you will make on selling it should be sufficient to enable you to buy a smaller home for cash and keep your retirement fund intact.
Avoiding price increases and future market fluctuations. The sooner you buy, the easier it will be to finance your home purchase. At the moment, for example, you will definitely need less income to qualify for a home loan than you will need in a year or two, when home prices will be higher.
“In short, home ownership gives consumers a range of financial and wealth creation options that renting simply cannot provide, and the sooner you start to access those, the better for your financial future,” says Coetzee.