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Buying or renting - which is best?

02 Jul 2018

There are many pros and cons when it comes to deciding whether it's best to buy or to rent a home.

"It often pays to evaluate your full lifestyle and finances carefully, as you might find that one option is wholly better than another," says Nelio Mendes, marketing manager at SAProperty.com.

For example, you could argue that owning a home is investing in your own future instead of paying off someone else's bond, thereby creating a stable living environment and putting cash into a solid investment.

If you work for a global company, however, it could mean you have to travel a lot, or possibly transfer from one country to another on short notice, so renting may be better now.

Then there's the upkeep of owning a property, which can be expensive and a lot of work, whereas it is the landlord's responsibility to carry the costs of maintenance or repairs on a rented property, as well as the logistics of arranging these - usually with a rental agent's help, says Mendes.

"In many instances, renting gets more house for your money," he says, "but you cannot make that property fully your home. You cannot renovate or change things without the landlord's permission, nor would you want to spend money improving a house that is not yours."

Another drawback of renting is that the owner might decide to sell or not renew the lease, which then forces you to move even if you have been a good tenant and want to stay on.

"Owning your own home ensures that you can live in it for as long as you pay your bond and can afford the upkeep. Many who buy a home look to live in it for the long term, perhaps while their children are at school and university, and would possibly even leave it to their heirs," says Mendes.

At present in South Africa, property is increasing in value at an average of 4.1% a year - according to a recent Lightstone report - but some areas are better investment options than others.

The same report says: "Over the past couple of months the market activity has stabilised in the 3% to 8% range following a slowdown in recent months as shown by the provincial indices. This is true for most of our indices except the Western Cape which is currently growing at an unmatched 10.5%, and the optimistic Mpumalanga breaking above this range.

The inland municipalities Ekurhuleni, City of Tshwane and City of Johannesburg metros are growing stably at rates between 2% and 5% whereas the coastal municipalities are generally performing above this range."

"If you were to rent and invest in shares or funds, the growth might be more on riskier investments, and less on the more stable funds, but there is also a risk of losing much if there is a bad investment, or in the case of offshore funds, the exchange rate changes dramatically," says Mendes.

Another point in favour of buying instead of renting, is that monthly bond repayments will not increase yearly unless there is a rise interest rates, as rent usually does. Again, all this money will be going towards someone else's investment, and not your own.

"Whether you choose to buy or rent, the crux is to choose something within the proper budget range, and not overextend your finances in any way. It is better to live in a smaller home with low maintenance costs than run a household with high overheads and be burdened financially," says Mendes.

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