Common questions asked by young buyers

According to RE/MAX Southern Africa’s regional director and chief executive, Adrian Goslett, the investment value of property has remained constant for many years.

“For those who can afford it, buying property will never be a financially irresponsible thing to do. I would caution millennials not to abandon the idea of owning property before they have thoroughly investigated its Some young buyers ask whether it isn’t better to rent than to buy.

“You need to factor in annual rent escalations and calculate whether you will be able to continue to afford the property over time. You also need to consider that rent, like interest paid on a home loan, is purely an expense. If you took out a home loan of R1.6 million and pay around R15 000 a month at a blended interest rate of 10%, you will have paid roughly R1.42m in interest at the end of 10 years.

By comparison, if you rented a property worth R1.6m for R8 000 a month, applying 9% annual escalation in rent, you will have paid roughly R1.460m rent by the end of 10 years. Not only are you spending more in rent than you would have been spending on interest on a home loan, you also have nothing to show for that money. Moreover, in 10 years’ time, your R8 000 rental will now cost you R17 000 a month, which is R2 000 more than the instalment if you were paying off a home loan.”

He says the cost to enter the real estate market does make owning a home difficult for younger buyers. However, with enough financial discipline and planning, they will be able to afford the cost of entry. He recommends that first time buyers speak to a financial adviser to work out an investment strategy that will help them afford to buy property in the mid- to long-term.

When it comes to travel there are several options, such as short-term letting and Airbnb, available to home owners who are out of the country for extended periods of time.

“You can make use of a reliable property manager to collect payment and be available to address any maintenance issues the temporary tenant might come across while you are out of the country. In terms of being protected against damages, certain homeowner’s insurance policies might provide cover if you rent out your home occasionally, while others will require you to take out a separate landlord’s insurance policy,” Goslett says.

“While buying your first home does come with its own challenges, the long-term benefits more than make up for this,” Goslett concludes.