While interest rates are set to rise in 2022, the rise is likely to be very mild.
This still means that buying your own flat or townhouse is far better in the short to medium term and definitely a real winner in the long term.
With current rentals for nice two-bedroom flats being around R6 000 per month, it is still most often cheaper to buy than to rent.
This is in absolute terms because the cost of a bond plus the levy payments is still often below the rental.
A bond of R6 000 means that you could get a loan of R720 000.
At R5 500 you still get a bond of R660 000 and have R500 per month towards the levy and rates.
While interest is going up slowly – likely to be one percent higher at the end of 2022 – rentals will continue to rise year on year.
So your R6 000 per month rental is likely to be R6 600 at the end of the year.
The reality is that for the first five years, you are likely to pay the same or slightly more to buy your own place but after that you actually score and score substantially.
While interest rates move up and down over time, rentals and value will continue to rise.
I purchased small holdings at the end of the 1980s for as little as R40 000 – its value now is over R1.5 million.
I could never have saved R1 496 000 over the last 30 years.
Now I have no bond on the property and only have to pay the rates and taxes.
Buying property is always an expensive exercise but over time it becomes the best investment that you can make.
You need to do your homework and buy the best property you can in the best area you can for the best price that you can.
It is important to understand that a strong well-maintained home is a better investment than a poorly maintained scruffy one.
Always look for the best suburb, the best street and the best home in that street that you can afford.
But owning some property is better than not.
Poor homes in good areas can be fixed up and improved.
Good homes in poor areas will however not increase in value over the short and medium timespan.
Make sure you understand what is happening in an area.
Willows, for example, changed from being a family home area to being a student housing area.
Prices were badly affected by the deterioration of the suburb into a scruffy, poorly maintained high crime area and all the disruption caused by students moving into the area.
Some properties benefited from this change in the area especially those with security but I would never advise people to invest in the area.
On the other hand, suburbs like Langenhoven Park continue to see the building of new high-class properties such as expensive townhouse schemes that are keeping a more stable population in the area.
There is no sign that this is likely to change in the near or middle future and so it has retained its most popular status and prices continue to rise and properties are easy to sell. But you will pay a high price for any property in this area as a result.
But coming back to where we started: my advice is don’t rent – buy and then you will be the destiny of your own future.
- Mike Spencer is the founder and owner of Platinum Global. He is also a professional associated property valuer and consultant with work across the country as well as Eastern Europe and Australia.