2021 certainly has been a year of change for most of us, and for more than some, it has involved moving in some way or another. We want to help you decide to either rent or buy. We weighed up the pros and cons of each and which option you should choose depending on your situation, this is what we found.
Buying vs Renting A Home In 2021
As this year progresses, buyers ask themselves; should I buy or rent this year? This year has presented property prices that first-time buyers and even second or third-time buyers could only dream of. All-time low-interest rates have resulted in accessibility to bonds being at an all-time high, meaning that individuals looking for a home have a larger selection in their respective budgets due to low barriers to entry.
The wealth creation strategy of buying property is instilled heavily in South Africans, especially with sale prices being low (however, they are on the rise as you read this) and interest rates at an all-time low, buying certainly seems like a logical choice.
But the question remains, should you buy or rent?
Is This The Market You'd Like To Buy Into
Most buyers are purchasing their home because they want to settle down and start a family, with the option to resell in the future if the option presents itself. But this is the problem, will this market present a return if you do decide to resell?
There are two sides to this predicament;
Areas that first-time buyers, or even second or third-time buyers, would like to purchase a home are exorbitantly high.
The bond interest rates are at the lowest they have been in 50 years, so if you are going to purchase, the time is now.
We consulted our home loan partner, ooba, to get some more insight into the current property market. Ooba's applications for home loans amongst first-time buyers have reduced in age, combined with the lower price of homes and a larger selection of homes available to buyers due to semigration allows for a market that will show sustainability. This means that if you do decide to buy into it, the chances of making money on a resell are higher than a few years ago.
Is Now The Right Time To Rent?
This is a complex question, because of the area and the type of home you are renting. To bring this down to earth, we turned to some statistics.
To understand the monetary value of renting vs buying, we looked at the average bond application value, and the average rent value, this is what we found; Currently, the average value of a bond in South Africa for the first-time buyer is between R875 000 and R1 000 000. The monthly premiums on this average bond value are between R6 900pm and R7 900pm respectively. The average rental value in the South African formal market is around R7800pm. This means that, on average, the smaller bond premiums are cheaper than renting, and the bigger bond premiums are on par with rental values.
This is just some food for thought, and depending on the area you are interested in or the type of home you want, these values can either be justified or unjustified.
What Can Be Expected From The Market?
What is bad for the real estate industry is not necessarily a bad thing for you, the buyer. However, if you are looking to buy because of attractive deals and low-interest rates could be a short-lived utopia if the market does not show continual growth.
Uncertain times result in unreliable long-term projections, so we can only look at the short-term expectations from the property market. What has been seen is that properties below the R2 mill bracket have had huge demand from buyers, helping with the average price of homes moving forward, however, the pricing bracket above R5 mill has not shown the same amount of demand. This means that the higher end of the market will take some time to recover, but first-time buyers have an opportunity that can be exploited.
Rentals will always be in demand due to the always-present barriers to entry to buy, albeit lower monthly premiums on average, some individuals are financially more comfortable to rent than buy, which in the grand scheme of things will always be the less risky option.
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