Making a choice that is right for you
Many young South Africans are unsure as to whether they should buy that first home or continue to rent. This is not surprising as purchasing a home is a considerable commitment and one of the most important financial decisions they are likely to make.
According to Rupert Finnemore, managing director of the Pam Golding Properties Gauteng region, there are pros and cons to both renting and buying a home, and individuals will need to take their personal circumstances into account when making a decision.
A good time to purchase?
“We are often asked whether it is a good time to purchase residential property, particularly as the current national economic climate is fairly subdued. House price growth has plateaued somewhat and buyers can obtain quality homes at more affordable prices in some areas,” notes Finnemore.
Finnemore cautions, however, against speaking in overly sweeping terms about individual regions within Gauteng, which are showing strong differences in terms of the strength of their residential property markets. “Pam Golding Properties is finding that many residential areas around the province are still in high demand while other local markets are more subdued. Like the national property market, regional and suburban markets are highly distinctive and tend to ebb and flow.”
The importance of location
Finnemore is of the view that now is a good time for those who are in a position to purchase a residential property to enter the property market, particularly as homes representing value for money are currently available if the homeseeker takes the time to do his or her homework. However, he says the location of any home is as critical as ever.
“It is important to purchase a property in an area where homes have historically held their values well. A trusted property advisor will be able to assist you in establishing this. If you have limited funds, consider purchasing a smaller property, such as an apartment or townhouse, in a good area, rather than a large property in a suburb in which homes may not hold their value well into the future.
“Investigate whether the suburb is popular and whether it has easy access to facilities and schools. Critically, consider whether the property is secure, as this is always an important factor not only for you and your family, but also potentially to the future value of your property. Your home is less likely to be attractive to buyers or renters if they consider it to be insecure.”
Gaining an asset
Finnemore points out that while it may cost a little more to pay off a bond every month than it does to rent a property, and you will need to pay transfer fees and other costs, it is important to remember that by purchasing a home you gaining a considerable asset. If carefully chosen, your property will almost certainly appreciate in value over time. If you rent, on the other hand, you effectively fund your landlord’s asset, who may use it to pay his or her bond and potentially make a tidy profit. In addition, in many areas renting is becoming expensive.
Jason Shaw, national sales executive at Pam Golding Properties, agrees pointing out that once you own a property you have gained a footing in the property market. From there you will be in a stronger position to access a bond to fund another residential property in future. “Furthermore, you will pay off your bond one day and your living expenses will then be dramatically reduced. Purchasing a home then is an investment in you and your family’s financial future.”
Shaw says that not everyone is in a position or at the stage of their life where they wish to acquire a home of their own, however. The rental option remains an alternative to those who are not in a position to purchase a home and, in the short term at least, is a less expensive.
“If you rent you do not have to invest in deposits, transfer duties, bond repayments and other costs that may be associated with buying a home. In addition, the landlord is also usually responsible for rates and taxes, insuring the property, as well as maintenance and repairs, costs that he or she is likely to build into the monthly rental.”
Some people also prefer the idea that it is easier to give notice on a lease rather than sell a home in order to relocate. This enables them greater mobility and makes the rental option more appealing to contract workers or people who have relocated to a new city. Other individuals are at a particular stage of life in which they prefer to defer making a major financial commitment,” says Shaw.
The importance of planning
Shaw points out that buying a home is not without its risks. “Proper planning is essential to ensure that any hitches are kept to a minimum. Make sure, for example, that you know about all the expenses involved when purchasing a property as there are a number of unforeseen costs such as the deposit, transfer duties, conveyancing fees, homeowner’s insurance, life insurance, bank charges and others.”
“Do your research on the home and the suburb,” he advises. “Have the property values in the area increased in recent years? What possible threats may be posed to the value of the property into the future? These are questions that you should carefully consider before purchasing any residential property.”
A first time option
Sectional title properties are very popular in Johannesburg’s northern suburbs and make up more than a quarter of residential sales in Gauteng. In Shaw’s view they can be sound option for first time buyers or older individuals who have reached a stage on their lives in which they want a more compact property.
“Many sectional title developments offer excellent value for money and a well run townhouse complex or apartment in a good area can provide an excellent return on investment over the long term. The fact that residents live together and all contribute to the upkeep of the complex and the maintenance of facilities means that many sectional title developments are able to offer a pleasing standard of living in an upmarket area.”
“Purchasing a home is an important step in one’s life and it is critical to obtain the best possible advice. In these times it is more important than ever to make sure that you choose an advisor with a solid reputation and an impeccable track record who will go that extra mile for you,” concludes Shaw.