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Buying or renting - what you need to know.

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Buying property, in the long run, may end up the cheaper option to renting with lower inflation rates and the pandemic muting the rental market for the foreseeable future.

It is now over a year since the first news of lockdown broke waters in SA, disrupting the regular flow, and doing irreparable harm to our economy. Since then, one of the most affected sectors remains housing, and more specifically, renting.

Negative growth causes rental sag

The latest rental index published by PayProp (an app for managing rental payments) further elaborates on how Covid-19 has effectively brought the rental market to its knees with growth declining rapidly in the final three quarters. This downslide in growth has not occurred between now and the report's initial launch in 2012.

The decrease in rental interest has been marked by a 0.3% decline since 2019 which, in terms of per capita spending, is a monumental dip from the annual 7% incline. Although that number had been decreasing the Head of analytics at PayProp, Johette Smuts expresses that a revival period remains under strain despite the lifting of lockdown restrictions.

"Affordability remains an important consideration for consumers in general, but specifically among tenants. As a result, we expect rental growth to remain muted for some time," says Smuts.

Can a fair rental price be established in 2021?

The short answer is no, as these values are also based on the overall Landlords discretion. The clear decline in household income during the pandemic has allowed fewer tenants to keep pace with normal rent, not to mention an increase. Owners have no choice but to lower their expectations and lower their prices.

Buying over renting; a new norm?

Here, we focus on the pros and cons of renting vs. buying:

Rent	Buy
Con: The more valuable the property, the higher the rent.	Pro: If the value of the property increases, the value of your personal wealth is also expected to increase and you are more likely to make a profit if you sell it.
Pro: Your landlord is responsible for all general maintenance of your home.	Con: You will need to keep a budget for building maintenance and repairs, although any upgrades to your home will likely increase the value of your investment.
Pro: Your rent is set for the lease period, usually six (6) to twelve (12) months.	Con: Your mortgage repayment may fluctuate - both up and down with interest rate changes if you choose a variable interest rate.
Con: Interest rate reductions, like in March, April and May 2020, benefit the homeowner while leaving you with a potentially inflated rent.	Pro: Interest rate reductions mean that you save money on the repayment of your mortgage, but you're still saving money on any rental income, which means higher profits for you.
Con: You're paying off someone else's home loan.	Pro: Your property is likely to be an appreciating asset, especially over the long term, and it could even be used as an investment property in the future.
Pro: Your monthly rent payment may be less than bond repayments, especially if you're sharing.	Con: Your bond repayments may be more than the rent you could pay to live in the same area, but paying off a home loan is a form of saving as you are building equity in a valuable asset.
Con: You don't have any certainty of tenancy control beyond the term of your rental agreement.	Pro: The property is yours to live in as long as you want to.
Con: You are limited in terms of property decoration.	Pro: Generally you can do anything you like with the decor and outdoor areas (subject to council or body corporate approval), and any improvements are likely to enhance your lifestyle and increase the value of your home.