The choice between buying or renting property requires careful consideration. Picture: Freepik
Making the choice between renting or buying property is a significant decision that requires careful consideration because it can have an impact on your lifestyle as well as financial well-being.
Claude McKirby, co-principal, Lew Geffen Sotheby’s International Realty in Cape Town’s Southern Suburbs and False Bay said that property is one of the best long-term investments, but there is often confusion on whether to delay the purchase or bite the bullet and buy.
McKirby offers five factors that you should to consider when deciding between buying and renting.
Take a closer look at your financial stability, credit score, and ability to afford the expenses that are associated with homeownership including a deposit, associated purchasing fees and ongoing costs.
Warren Tromp, Executive for Product Development, Nedbank said that credit is a powerful financial tool and without it, many South Africans would not be able to make the big purchases such as a car or a house.
You need to consider your long-term plans, career aspirations, and lifestyle preferences.
Owning a property may be better suited to certain life stages and goals. For example, if you plan to travel extensively for a few years, it might not be the right time to buy.
Do you research and look into local real estate market trends and assess whether buying or renting is more advantageous in your area.
However, you need to keep in mind that when the market is down, you can also find good deals or find a property under market value.
Factor in the costs of homeownership, such as property taxes, insurance, maintenance, and potential HOA fees.
Renier Kriek, managing director, Sentinel Homes said that homeowners, particularly first-time buyers need to be aware of their tax obligations and plan their property investments accordingly.
According to Kriek, when homeowners buy property they will either pay VAT or transfer duty, but never both and after taking ownership of a property, they will immediately start paying municipal taxes.
“If you sell your property, you’ll pay capital gains tax (CGT), which is when things get a bit complicated,” Kriek said.
"CGT is calculated on the difference between what a person paid for a property and what they are selling the property for.“
McKirby said that you to consider the opportunity costs of buying or renting.
“For example, if you choose to buy, the funds tied up in a down payment and ongoing homeownership expenses could be used for other investments or financial goals if you were renting instead,” McKirby said.
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