Should you stay or should you go? Unpacking buying vs. renting
Whether it’s six months with a sublime sea view or years spent perfecting the ultimate fixer-upper in the suburbs, you need a plan. The question of buying or renting is one that can’t be answered without drawing out your goals. The long and the short of it is that your future determines the outcome of this question. You know you’re moving, but why? At what cost? And for how long? Your employment status and prospects, family composition, lifestyle preferences, hobbies and activities affect this decision.
In South Africa, there is a strong culture of owning; a desire to own one’s own home both from an investment as well as a lifestyle perspective and so this continues to be the dominant trend. However, in recent years the rental market has benefitted from the ever-increasing number of people who are unwilling to buy homes for whatever reason and this market is particularly strong at present.
Buy that dream home
It’s yours, you own it, once it’s paid off. Buying tends to be the right move if you plan on staying a while, predominantly because the costs involved can be spread out over a few years. If it’s a good move, your home appreciates more than you’ve paid in mortgage, interest, taxes, and maintenance over time – you’ve earned a return, or you break even. Having the luxury to renovate your space to suit your needs and nourish your creativity can be appealing, especially when it elevates the value of your investment. You can also get a dog.
Rent that designer space
The more affluent areas can become accessible when you rent. You could find yourself closer to work, entertainment hubs, yoga classes and upmarket corner cafes in an area you can’t yet buy in. Everything happens faster; you can move in faster, you can leave for greener pastures faster. Major maintenance costs, they’re not yours, for the most part. But neither is your home. Renting means a deposit, sometimes two month’s rent, which you’ll need available. Is it money going down the drain? No it isn’t, it’s giving you a place to live. Your money is going into someone else’s pocket, but when the pipes pack up, the plumber will be digging into those pockets too. The rental option remains ideal for contract workers relocating nationally or internationally. Your dog may or may not be welcome.
The buy-to-let landscape
It’s an excellent time to be a landlord in the buy-to-let market – the market is very active and characterized by a shortage of rental stock, an oversupply of would-be tenants and as a consequence a trend of increasing rental yields and a market which is experiencing above inflation annual capital growth.
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In terms of property types, there is strong rental demand across the board – every segment of the market is currently very active. Property markets are cyclical and so if you are looking for a property to buy-to-let, you must consider buying a property that will rent well in any market. There are examples of this in every segment of the market but investors need to do their homework well, consult knowledgeable and trusted experts and in the process make a well-considered investment decision.
Expert advice? Pam Golding suggests you buy when you’re ready to invest in a home, this includes saving for a deposit, qualifying for a loan and committing to a long-term investment. Rent when you’re not staying forever, have plans to build up that deposit, want access to a premium suburb and don’t want the hassle of property maintenance.