With South Africa’s energy prices increasing faster than the consumer price index, home buyers should consider moving as to close to their workplaces as possible.
That’s the message from Professor Matthew Lester of the Rhodes School of Business, after the release of South Africa’s 2013 budget.
A guest speaker at Greyvensteins Attorneys recent Property Forum in Port Elizabeth, Lester said that South Africa was in an energy crisis, evidenced by the fact that it was paying international prices for electricity and petrol. It was therefore critical for consumers to start relooking at their energy usage and what it was costing them to travel, he said, adding that transport costs needed to be moved to the top of home buyers’ priority lists. With the very high cost of fuel, and carbon tax coming strongly into South Africa, the cost of which would be passed on to the consumer, people needed to travel less, he urged.
While ‘location, location, location’ was still the watchword of real estate buying, he continued, this real estate truism now had to include proximity to work. By living close to work, he said, consumers could make a significant impact on their “prohibitively expensive living costs” to ensure that they would be able to afford to maintain their homes in the long run. Properties were often affordable to buy but too expensive to keep, he added, hence his encouragement of people rechanneling as much of the money they were currently spending on commuting as possible into paying off their bonds and the general maintenance of their homes.
Lester also urged people not to rely on the government to put a roof over their heads, saying it was already supporting the majority of the country’s 52 million citizens in terms of social grants. Pointing out that people today had a life expectancy of 100 years, he said many would be retired for as long as they had worked.
“The time of the six parent family has arrived - can we afford to all live in different homes?” he asked. To this end, he suggested that there had never been a better time than now to make “structural” changes. This was particularly pertinent to families able to live comfortably on the same property – what he referred to as ‘bunking up’. “This is a huge opportunity to save a fortune,” he said. “Paying your bond is one thing, maintenance and upkeep quite another, so if you’re going to move, make the move now and don’t follow the market.”
While a relatively alien concept for South Africans who were used to long and congested commutes, and who placed a high value on location and late model cars, the concept of living close to work was gaining momentum in other countries, says Richard Gray, CEO of Harcourts Real Estate.
“The issue of living close to work has been thrust into the spotlight by, among others, the Chicago-based Center for Neighborhood Technology (CNT) and Johns Hopkins University in Maryland, USA,” he says. “The CNT uses a Housing and Transportation Affordability Index to measure the true affordability of housing based on where it is located. The ideal according to this index is that housing and transport costs, the two largest expenses in most homes in the US, should account for no more than 45% of their budget, and this is likely to apply to South Africa, too.”
The “Live Near Your Work” initiative of the Johns Hopkins University further underpins the shift in home buyers’ minds, he maintains. “The programme has been designed to help employees reduce their travelling costs and times while simultaneously building equity in their homes. Michelle Carlstrom, senior director of the University’s Office of Work, Life and Engagement, who oversees the programme, relocated and in so doing, reduced her daily commute from almost 90 minutes to just four minutes. That’s not just a huge saving in petrol and wear and tear but also in terms of time: 85 minutes a day multiplied by 22 working days a month equals 31 hours of driving time saved in just one month! Multiply this by 11 months and she is saving 341 hours of driving time a year. Imagine what you could do with that time and the money saved!”
Gray says home buyers need to buy what they can comfortably afford, not only in terms of initial purchase price but also in home and vehicle upkeep. “When working out a budget for a new home, it makes financial sense to factor in travel expenses such as petrol, vehicle payments, maintenance and insurance to ensure that you’re able to cope with inevitable fuel and electricity increases.”
Something else for house hunters to consider, he adds, is quality of life. “Living close to your workplace will allow for a better balance between work and home. You’ll have more time to spend with your family or friends and more time to pursue hobbies or upgrade your skills.”