Saving for the deposit on a home is like training for the Comrades Marathon – the earlier you start and the more regularly you run, the better, so that your body has time to adjust to the strain and build up the necessary muscle and stamina.
So says Rudi Botha, CEO of BetterBond, SA’s biggest bond originator, who notes: “Everyone knows that the best time to start training for next year’s Comrades is just after this year’s race, and getting ready to buy a home is the same – it takes time as well as discipline.”
At the moment, he says, the main obstacle to ownership for many young people is the lack of a deposit. “It is true that lifestyle changes have a part to play in young people buying their first homes much later than they used to. Millennials like to travel more than their parents did, for example, and tend to stay single longer. Many are also only starting to work at a later stage, but the biggest reason for the delay is that they don’t start saving for a deposit soon enough.
“People in their 20s now often have study loans to pay off, car payments to make and credit card debts on top of the rent and other monthly living costs, so there is usually not much salary left to save every month, but if they want to be homeowners – or even just to buy an investment property – we believe they should start saving that little bit anyway and putting the power of compound interest to work.”
The way this works, Botha explains, is that those who start saving now could accumulate a R50 000 deposit in five years just by paying R720 a month into a normal bank savings account that pays around 6% interest a year.