Whether to buy or rent is one of those difficult questions that doesn’t have a clear answer. The best option depends on much more than just affordability. For example, buying may mean spending more each month, but the amount spent would go towards a long-term investment. And, while renting is initially cheaper, it could be more expensive in the long run. Although we can’t tell you which is best for you, we can explain their advantages and disadvantages to help you decide.
- The renting route often allows more flexibility, which might suit you if you're not sure where you want to settle down just yet, or if you still have extensive travelling plans. While some landlords may want a defined lease period (typically a year), they generally don’t need any long-term commitments (some will even allow you to lease on a monthly basis).
- Say, for example, you want to live close to your work, but cannot afford the high property prices, renting would offer you a valid and cheaper alternative (a big advantage for some professions).
- Even if you are locked into a 12 month lease, moving is a lot easier when you're renting the place you live in. You might have to forfeit a deposit if you terminate your lease before your contract’s end date, but you’re always able to up and move. You don’t have the same level of freedom when you own the place.
- You are not responsible for maintenance, unless you break whatever needs repairing. Normal wear-and-tear maintenance doesn’t come out of your pocket.
- In general, you pay less than you would on a property you own, especially once you consider levies, taxes, rates and everything else that goes with owning a house. This allows you to save any remaining money you have at the end of the month.
- You do not have the freedom to make any changes or renovations (unless you have permission from the landlord, but make sure to get this in writing).
- There is no certainty that you will be able to stay as long as you want to. The landlord may decide not to renew the lease when it expires, or they may even sell (depending on the lease agreement, the tenant might be protected).
- Dealing with a landlord or a rental agent can be tricky and time-consuming (not to mention frustrating). They may delay fixing things, and there may be disagreements as to what ‘normal’ wear and tear means.
- Renting means that the money spent merely affords you a place to stay for that period. You get no returns on the money spent, which is why many people argue that you should rather be paying off your own home loan (buying) than someone else’s (renting).
- Your landlord is entitled to raise the rent based on annual inflation rates (though usually only at the renewal of a contract).
- Buying a house is still considered one of the better investment options – provided that you look for a good deal in an area where property values are likely to rise.
- In addition to being a good investment, a house also offers you security. The only way you’ll be evicted is if the property is repossessed.
- Houses increase in value in the long term, which means you will probably be able to sell it in future (if that’s what you want) for more than you bought it.
- You have the freedom to renovate or make changes to the house.
- You can use your house as you please, unlike when you rent; for example, when renting, your landlord may specify that they won’t tolerate parties at their property. (If you do throw parties in your own home, however, please keep the neighbours in mind.)
- Buying a property means you can use it as an extra source of income if you choose to rent it out (making you the landlord – more on buying to let later).
- Having a bond can be quite handy. By refinancing a mortgage you can get access to extra cash at a relatively low interest rate.
- The main deterrent to owning a home is the financial implication, which can be more than what you might think. These ‘extras’ include transfer fees, rates, sometimes levies (over and above maintenance fees), taxes and your monthly home loan payments.
- Based on fluctuating property prices and uncertain economic landscapes, property buyers risk selling their properties for less than they had bought it (though this is an unlikely risk).
- Buying a house makes it a lot harder to move (overseas or to another city). Selling it might be very difficult and time-consuming, while with renting you typically just need to give notice as stipulated by your contract and then leave.
What about buy-to-let?
Buy-to-let (BTL) properties are another option when it comes to the whole ‘rent or buy’ question. If you’re debating this, then you have most probably heard “Why pay off someone else’s mortgage when you can pay off your own?” more than once. Buy-to-let involves buying a property with the purpose of letting it out, the idea being that the rent income pays off your mortgage (or at least most of it).
Moneyweb warns, however, that BTL properties might not be the sure investment that they once were. While you can still benefit from these investments in some parts of the Western Cape, it pays to be cautious. Do your research on what a property in your ideal area will actually cost you (considering the high rates, levies and taxes) and if the rental income will cover these costs.
For more financial tips, sign up for the Money Mailer. In this free newsletter, we cover a range of articles – from tips on how to save more to affordable holiday ideas. Get these money insights delivered to your inbox by signing up for the Money Mailer now.