OPINION: The lifetime benefits of buying a home when you are young
Whether you’re a home buyer or a property investor, there is exceptional value on offer now in almost every price bracket in SA – and thankfully for the property market, these opportunities are also accessible to an unusually high number of purchasers because of the low interest rates.
That’s the word from Berry Everitt, CEO of the Chas Everitt International property group, who notes: “Price growth has been outpaced by salary growth for the past few years, which has helped to make home ownership more affordable for many working South Africans, but it is the low rates that have really tipped the scale and are driving the very high number of first-time buyers at the moment - as well as much higher-then-expected levels of sales activity among repeat buyers.
In addition, he says, the message is now definitely getting through to younger buyers that sooner is always better than later when buying real estate because whatever the interest rate is, steadily rising home prices will always mean that you need a bigger home loan this year than you would have needed last year to buy the same property – and a higher salary to qualify for that loan.
“This is evident from the fact that the average age of first-time buyers in SA has been dropping rapidly this year, from around 37 before lockdown in March to around 34 currently as more and more young people realise that paying off your first home during your 20s and 30s instead of in your 40s and 50s can make a huge difference to your financial future and that of your family.
“The sooner you start gaining equity n your property by paying off your home loan, the sooner you will gain an asset that you can sell, rent out or use as collateral to borrow money so that you can afford tertiary education for your children, for example, or invest in further rental properties that will boost your income in retirement.”
Alternatively, says Everitt, buying young could just mean that you are “bond free” by the time you get to your mid-40s, and have more financial leeway to do whatever you please, whether that is saving for retirement, or educating children, or travelling, or supporting your parents.
“What is more, putting any spare cash into your bond now will not only give you a much better return – tax free – than you can currently achieve in just about any other investment that is not much more risky. This is a habit that can actually help anyone pay off their property much sooner than expected and save hundreds of thousands of rands worth of interest.
“If you have a bond of R1m at an interest rate of 7%, for example, and pay in an extra R1000 a month, you will reduce the bond repayment term by more than four years and save some R208 000 worth of interest.”
And now, he says, thanks to the growing remote-working trend, young buyers may not even have to follow the traditional route of first buying a small apartment close to work and then moving to a bigger home as their family grows.
“The rapid uptake this year of technology that makes it possible to work from anywhere that has good cell phone and internet connectivity, also means that the first home you buy could now also be your ‘forever’ home, perhaps in a coastal or country town that is (for now) still much more affordable than one of the big metros.”
Meanwhile, he says, repeat buyers are finding especially good value in the R2,5m to R5m price bracket, where there is still an oversupply of stock and a careful upgrade is likely to represent a really good investment, especially if you have a decent deposit from the sale of your previous home.
“And despite the current downward pressure rentals, the prospects for buy-to-let purchases are also improving, with the demand for rental accommodation of all types set to grow over the next few years. Initially we expect this to happen due to the delayed effects of Covid-19 and the lockdown, but within a few months demand should also start to be driven by the large infrastructure projects being undertaken as part of the government’s economic recovery plan. This will underpin rentals and as things stand now, prices are extremely competitive so investors should not delay.”