2 days ago
Now that you are an adult, moving out of your parents’ home becomes one of the next steps to your independence. So, the question arises: should you buy or rent your own home at this stage of your life?
Most buyers aged 35 years and younger are new entrants to the property market and 70% of first-time buyers fall within this age group, according to Lightstone Information Solutions.
Owning a home can bring a sense of stability and security, in knowing that you have a place where you can put down roots, possibly with a partner and raise a family.
The opportunity to personalise your living space and have greater control over your lifestyle is appealing, especially if you spent years renting from a landlord.
Owning a home can be a significant investment opportunity too, provided that the property appreciates in value.
However, before taking this step, it is crucial to understand the long-term financial commitment and responsibilities related to buying a home, Sarah Nicholson, operations manager of JustMoney.co.za, says as it is essential to weigh up the benefits of buying a home against other financial priorities.
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What you need to buy a home
“You need a stable income to save for a deposit and make repayments and a solid credit score to secure a favourable interest rate. You should also understand the obligations of home ownership, such as paying for insurance and maintenance,” Nicholson says.
“This involves assessing your financial health, including your income, savings and existing debts to decide on a real strict budget for buying and owning a home.”
Some lenders will not extend a home loan to clients under 35 years of age, making careful planning even more crucial.
If your heart is set on buying a property, saving for a deposit can work to your advantage and increase the possibility of getting your home loan application approved, she says.
Nicholson offers these tips for young adults to boost their deposit savings and increase the likelihood of buying a home of their own:
- Create a detailed budget and savings plan
- Set achievable savings goals and milestones
- Automate savings transfers to a dedicated account
- Cut unnecessary expenses
- Increase your income through side hustles or freelance work
- Invest any windfalls you receive, such as a tax repayment or work bonus
- Explore government assistance and incentive initiatives
- Monitor and maintain a good credit score for better home loan terms
- Consider low-risk investment options – these may offer higher returns than a term deposit.
Nicholson warns that navigating complex legal and administrative property-transaction processes can be daunting and says it is advisable to seek guidance and support. Tools such as home loan calculators and consulting a reputable bond originator and financial adviser can help you make an informed decision.
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Consider your lifestyle choices
Examine your lifestyle preferences before you buy a property. It may be worth paying more for a home that suits your needs in terms of location, size and proximity to amenities, rather than opting for a cheaper property without those benefits.
Lightstone notes that the number of South Africans aged 35 or younger who buy houses has declined since 2018. However, those who do invest in property pay more for it.
Purchases by young adults aged 26 to 35 decreased by 25% from 2018 to 2023, but 36% of those buyers paid R1 million to R3 million in 2023, compared to 29% in 2018.
Nicholson says lifestyle factors to consider when choosing your new home include:
- Interior space for current living needs and future growth, such as a home office or starting a family
- Outdoor space for pets or outdoor activities
- Proximity to work, friends and family
- Access to major roads to reduce commuting time and costs
- Amenities such as gyms, parks and shopping centres in the vicinity
- Safety and crime statistics in the area
- Plans for future developments that might affect the neighbourhood.
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Do your homework before you buy
Nicholson says it is also worth checking market trends and resale values to ensure the investment aligns with your long-term financial goals.
Housing prices have dropped in many South African suburbs, but this can be due to factors such as deteriorating infrastructure, potholes, load shedding, and water cuts. It is essential to do your homework first.
“Reduced property prices may offer a more affordable entry point into the housing market, allowing buyers to get a larger or better-located property than was previously possible,” says Nicholson.
Lower prices also mean lower bond repayments and potentially reduced property taxes, offering immediate savings.
Moreover, buying when the market is down positions buyers to benefit from property appreciation when market conditions stabilise or improve. This offers potential long-term investment gains.
Nonetheless, a declining market could indicate broader challenges, such as municipal mismanagement and stagnating economic growth, which may further affect property values.
Furthermore, reduced demand and oversupply of housing could make it harder to sell your property. Decreased property values might also affect your overall return on investment.
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