When is renting better than buying?

Home ownership is becoming increasingly possible for a growing number of South Africans – but there are times when it may actually be better to rent a property rather than buy one.

So says Berry Everitt, MD of the Chas Everitt International property group, who notes: “For a potential buyer who is working on contract, for example, and is most likely to be moving to another area within a year or two, it most probably makes more financial sense to rent rather than to buy a home.

“Even rapidly rising property values are unlikely to generate sufficient appreciation in this short period to cover the ‘hidden’ costs of buying and quickly selling again.”

On the other hand, it may be a viable option even for people who move around a lot for work to buy and hold a property somewhere – not necessarily where they are working - as an investment.

“This may mean that they have their own tenants to consider, but it does mean they will have a foothold in the property market when they are able to settle down.”

Meanwhile, it might also be better for would-be buyers to rent a home when a purchase would stretch financial resources very close to the limit.

Writing in the Property Signposts newsletter, Everitt suggests that they “test the water” for a few months by renting and trying to come out on a budget after making allowance for their likely home loan repayments. “If this works without too much stress you can go ahead with a purchase more comfortably.”

And lastly, he says caution may be better than home-ownership if a couple is going through a rocky time in their relationship. Co-ownership of a property only complicates a break-up or divorce.

Article by: www.chaseveritt.com