Property purchase is the best way to save

If the Reserve Bank is trying to encourage South Africans to save rather than spend, it needs to create a stable environment that encourages the purchase of property, says Niël Cronje, CEO of Engel & Völkers South Africa.

“Six successive interest rate increases, spiking fuel prices and impending increases in municipal rates are creating an unstable environment, that prevents careful and meticulous financial planning,” Cronje says. “If South Africans want to enter the property market now, at a time when the average house price is close on R1million, they cannot be certain of what the future holds for them financially, and this is discouraging them from investing in the single best purchase – fixed property.”

“Purchasing home is without a doubt the best way to save and invest money – it is an asset that will, with few exceptions, appreciate in value. It confounds me that if South Africans are supposed to be saving, why our government doesn’t provide some sort of tax relief for home owners, allowing them to deduct mortgage repayments from their taxable income.

“A different kind of incentive would be to offer a lower interest rate for mortgages, with the added factor of higher interest rates being applied loans taken out for any other purchases of luxury items such as vehicles and non-essential items,” Cronje adds.

Cronje endorses the strict systems and processes described by the National Credit Act, as the Act compels potential buyers to take a realistic view on what they can really afford. “However, buyers who may be contemplating purchasing a property may just see this as yet another hurdle to their goal, added to interest rates and unpredictable costs of living, and will simply choose not to enter the market – a dire result for the future of the economy as a whole,” he says.

“There is a property on the market to meet nearly every budget requirement, if buyers are willing to stretch their boundaries,” Cronje continues. “Getting onto the property ladder in an area you perhaps may not have considered before, is better than not getting into the market at all, and I would strongly encourage South African consumers to buy property now, after careful planning and allowing for contingencies. A property remains the best way to invest your money, to provide for your future and your family’s future.”

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