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Do I buy or do I rent a property?
Financial stress in the weakening economy is likely to prompt more
potential buyers to rent. This applies to buyers in all segments of the
market. It is possible to rent a property for less than a mortgage bond
repayment on the same property, The difference between the monthly
rental and the mortgage bond repayments on a property will vary
depending on the value of the property. The higher up the price ladder
you go, the higher the percentage difference between the mortgage bond
installment and the rental.
When renting a property the financial discipline to save diligently
towards a deposit is paramount.. Unfortunately, South Africa is a nation
of poor savers, and that ‘extra’ money is more likely to end up spent at
a shopping mall than in an investment.
The benefit of a mortgage bond forces you to be financially disciplined,
whilst paying towards an asset.
Erwin Rode, a property economist says a fallacious argument that is
often used against renting is that it makes a landlord rich. The person
who uses this argument does not seem to mind making a bank rich by
paying interest on a home loan. The harsh truth, Rode says, is that if
you cannot afford to buy a home for cash, you have to choose whom you
are going to enrich: a landlord or a bank.
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