When it comes to making that all-important decision as to whether or not you should rent or buy, there are a few factors you need to take into consideration.
Affordability – Buying
Property is a great investment option but sometimes the thought of having to cover all the costs associated with owning a home can be daunting, especially for first-time buyers. It all comes down to disposable income.
Buying a property is not just about the monthly bond payment. The recent 50 basis point interest rate hike has pushed prime to 8.25% and some economists are expecting additional hikes of up to 100 basis points by year-end. if you haven’t fixed your interest rate, you will need to look at how additional rate hikes will impact your repayments.
You also need to take into account those upfront costs like transfer duty, transfer costs i.e. lawyer’s fees and bond registration costs. And let’s not forget once you own your home, there are rates and taxes, as well as those unexpected maintenance costs, and insurance – no more calling up your landlord to come and fix those leaking pipes, it’s all on you now.
Is it still a good time to buy?
Banks are competing more than ever on the home loan front and deposit requirements are as low as 7% compared to previous years of around 10%. House price growth has slowed to around 4% and at these levels, there is still value to be found in the market. The property market is still expected to show growth throughout 2022 but at a slower rate than in 2021.
With the onset of remote working and the semigration trend to hotspots like small coastal towns, finding value is not always easy. Our recent article on semigration highlights the advantages of looking inland where not only can you find value for your money but also improve your quality of life.
Affordability – Renting
Your monthly rental payments are fixed and your biggest outlay initially will be your deposit. And another great advantage is, generally, your landlord will be responsible for repairs and maintenance.
Considering what you’ve just read, this may seem like the perfect option but instead of paying off an asset that will grow, you’re most likely paying off or significantly contributing to your landlord’s home loan repayments. However, you may prefer to invest your money where your growth could exceed that of a property investment.
Gaining growth through investing
Advantages of renting mainly relates to having more disposable income in the short term. But to make that work for you in the long term, you will need to either save or invest that extra income as opposed to just spending it.
A bit of research is required when it comes to deciding whether or not to buy based purely on investment growth. You can for example compare what the total cost of a property would be over 20 years to the rental amount you would pay for a similar property over the same period – just don’t forget to include inflation in your monthly rental payments.
Any savings made from renting would need to be invested so that your assets are worth more than your property. Deciding on where to invest, well, that’s a whole other tricky market to navigate!
Whether you rent or buy, we wish you much happiness in your future home.
Author: Midlands Developers Direct
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