This article looks at the pros and cons of renting property and the pros and cons of owning your own property. We will be considering whether it is better to rent or buy property in South Africa’s current environment.
The current high property prices in South Africa has the effect of property being rented out at a substantially lower amount per month then what the bond repayments on the property would be. A property worth R800 000 could easily be rented at about R4 000 a month while bond repayments on a property of that value will be round about R10 000. The R6 000 saved on renting over buying the property makes a strong argument for renting property.
Although this equation seem to endorse renting over buying it does not take into consideration the effects of ownership or rental over a longer period of time. Renting the property in our example will most likely be subject to annual increases whilst the value of the property is also likely to increase on an annual basis. This will have the effect of increase in capital growth for the owner over a period of time while the person renting will have to increase yearly expenditure with no capital gain.
Renting can pay off if you use the extra monthly saving wisely. The extra monthly savings should go towards wise investing and not towards purchases to enhance your lifestyle. Over the long run purchasing property remain the better option as the bond will reduce over a period of time and the property will gradually turn in to positive equity.
In conclusion it can be deduced that renting property over a short period is a reasonable option but over a longer period owning a property is the sensible option. If you cant afford to buy a property right now start off renting and invest your extra expendable income so that it can be used towards purchasing a property further down the line.