Sooner is always better than later for home buyers

It almost always makes more sense to buy a home rather than rent, says Rudi Botha, CEO of SA's biggest bond originator BetterBond*, simply because being a tenant means giving away what you would have spent on housing anyway, without anything to show for it.

"By contrast, home ownership is the easiest way for young people, especially, to accumulate personal wealth. This occurs as the value of the property appreciates over a number of years and the size of the outstanding home loan decreases month by month. There are also several relatively easy ways to accelerate this process, such as paying an extra amount off your bond each month.

"In addition, you can maximize the possibility of value appreciation by buying in an area where your target price is in the lower tier of current prices in that area. That way, your home will have less vulnerability during any downturn and the higher-priced homes will help pull yours up during 'hot' markets.

"There are those, he notes, who believe that the real estate market is not yet at the bottom of its current cycle, and that they should wait for home prices to become even more negotiable than they are at the moment. "But even property experts can't really time the market with any degree of precision, because there are just so many factors to take into account.

"The reaction to major economic or political events, improvements or declines in consumer and business confidence, interest rate increases or decreases, crime, employment, supply, demand, migration, urbanization and densification vary literally from suburb to suburb, so consumers should rather set their own purchase agenda and buy when the timing is right for them.

"Botha says there is naturally also some resistance to buying among those who know they are going to have to move in a year or two, "and our advice to such consumers is indeed that it may be better to use this time to save up a substantial deposit in order to buy a home in their new location.

"However, those who are staying put should, we believe, be buying as soon as they can possibly afford to do so, because overall market conditions do favour buyers at the moment, in that there is a surplus of stock for sale and that it is relatively easy to obtain a home loan.

"The banks are currently keen to lend to home buyers, as evidenced by the fact that we continue to be able to secure approval for more than 75% of the bond applications we submit - and that almost two-thirds of applications are being converted now into formal bond grants.

"What is more, he notes, BetterBonds' multiple-bank submission process ensures that it is able to negotiate the best available interest rate for every client - and in the process set them up to cut a substantial amount off the total cost of their home over the life of the bond.

"At the moment, we are finding that the average variation between the best and worst rate offered on an application is 0,5%, and on a loan of R1,5m, for example, that could translate into more than R120 000 worth of interest over the 20-year lifetime of the loan, plus a total of about R6000 a year off the home loan installments."

*BetterBond is our preferred mortgage originator. Its statistics represent 25% of all residential bonds being registered in the Deeds Office and are thus a reliable indicator of the state of South Africa's residential property market.