With interest rates rising to near pre-Covid levels, many may be contemplating whether it is better to purchase or to rent. One way to decide what best suits you is to compare the possible monthly bond repayments with the corresponding rental prices.
Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett, explains that there are advantages to both options. “Renting offers the tenant a certain amount of flexibility, while buying a home can provide the owner with an asset that will earn him/her a substantial return on investment. Each individual needs to evaluate their circumstances and make the decision that meets their needs.”
To help individuals get an idea of what their money can buy them, RE/MAX shares a few examples of rental prices compared to house prices.
Western Cape
For under R1,5 million a buyer can purchase a one- or two-bedroom townhouse or apartment in Parklands. For R12 000 a month tenants can rent a slightly bigger two- or three-bedroom townhouse or apartment in the area. In this price range in this area there is not too much difference between renting and buying.
However, in areas closer to the city centre, such Rondebosch and Claremont, buyers can afford a one-bedroom apartment of roughly 50 m² or less for around R1,5 million, while rent on a similar home is roughly R8 000 p/m. For R12 000 p/m in rent, you could afford a place possibly double in size.
Final Advice
As a final consideration Goslett compares house-price appreciation against annual rental escalations. “While you could be paying R8 000 for a home in year one,” he says, “you could end up paying as much as R17 000 on the same home in ten years’ time if we assume a 9% annual increase. This compared to annual house price appreciation which is currently sitting at roughly 4,46%, which means that you can sell the property for much more than you originally bought it for. Deciding what is the best option for you is not always easy. If you’re grappling with this decision, get in touch with a trusted real estate advisor to explore what you can afford.”
