Is it better to rent a property than buy one? A recent poll conducted by a large classifieds portal showed that 66,6% of people believe that it’s always better to own your own home, while 26,6% said they couldn’t afford to buy or rent and have to share with others.
However, there is no right or wrong answer when it comes to your home, says Claire Cobbledick, Head of Marketing for Gumtree. “It depends purely on personal circumstances.”
Owning a house is a long-term investment that is sure to bear fruit, but renting removes the need for maintenance costs, insurance and rates (not to mention a hefty bond) which means that you have more expendable money in the short term. Recent analysis of property up for sale and rent on the classifieds site shows that rentals (and the demand for rentals) are on the increase.
“When interest rates go up, the cost of owning a home increases (if an individual was not offered a fixed interest rate), and against the backdrop of a sluggish economic year, more people are renting out their homes or scaling down,” says Cobbledick. “Being a homeowner comes with fantastic long-term rewards, but also huge financial responsibilities including bond repayments and maintenance, which can be tough to manage.”
The average rental price for a two bedroom property on Gumtree in Cape Town is R8,715 and in Johannesburg it’s R5,421 – there are however, nearly three times as many properties for rent in Johannesburg as in the Mother City.
“According to our analysis, popular areas at the moment include Sea Point and Three Anchor Bay in the Western Cape, Queensburgh in the West Suburbs and Parow in the Northern Suburbs of Cape Town. It’s very clear that the property market is active in all areas, with prices ranging from R250,000 to R3 million and upwards,” says Claire Cobbledick, of Gumtree South Africa. “More expensive properties are being placed on the market or made available to rent, which is not unusual in the current economic climate.”
House prices in some of the “hot zones” are definitely influenced by the increase in demand for rental properties. “The Atlantic Seaboard is a prime example – the average sale price of a 2 bedroom property has remained virtually unchanged since 2014, but the average rental prices have shot up 25%.”
Cobbledick says that the site anticipates a hike in the number of properties up for sale and rent in 2015. “3, 6 million South Africans are currently renting their property and as interest rates incline, individuals are less likely to purchase.”
However, owning a home offers the long-term benefits of equity, and greater freedom in its use without restrictions as enforced by a landlord. “You can alter the property to increase its value, landscape or renovate according to your taste.”
Socio-economic circumstances, however, means that many individuals cannot always afford to pay a bond, which can be considerably more than monthly rental. “We know that individuals tend to move between jobs much quicker than they did twenty years ago, hence the appeal of not being tied to a location through property ownership.”
An estimated 2.4 million households rent their homes, although there are many informal rental agreements and house-shares in place that are not accounted for in official statistics. “If you want to move from renting to owning, it’s a good idea to start saving as much as you possibly can,” she advises. “Use online property price checkers to see what homes in the area are being sold for – you can use that benchmark to work out your bond costs and transfer fees.”