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Monday Jun 22, 2020

Owning vs renting in post-lockdown South Africa

In the wake of the COVID pandemic, the property market at large, much like the rest of the economy, has taken some serious strain. So, where does this whole situation leave tenants and prospective buyers - should you keep renting or should you be looking at owning a buy-to-live property right now?
A buyer’s market

Hats off to the Reserve Bank who has cut the prime interest rate to 7.25%.  This low interest rate environment (likely to persist for at least another three years) gives direct cashflow relief and interest savings to those with home loans. These savings mean improved affordability for those in the market for a new home, making it cheaper to own your dream home or give you the opportunity to afford something previously out of reach.
To quote a crazy old property economics lecturer of mine, “You make money when you buy property, not when you sell it” - given the current market and the low repo rate, this statement couldn’t be more apt –  with the present situation lending itself to making good buy decisions that will increase the prospect of capital growth in the future.   Furthermore, you are getting good value for your buck, with a well-priced, bigger property pool to choose from (with a pool nogal)!
There ain’t nothing going on but the rent

Understandably both landlords and tenants are worried about the coming months, perhaps even years.   Although some respite has come in the form of reduced bond repayments, there has been a definite shift in the rental landscape. Flexibility has become a necessity when it comes to rental payment plans with existing tenants as hanging on to good quality tenants becomes the name of the game. 
However, the drop in the repo rate means bond repayments have come down enabling landlords to reduce their rentals for existing tenants (albeit a short-term necessity), which is also fortunate for people seeking new rental opportunities who can possibly negotiate on rentals during this time.  Some landlords may even consider foregoing deposits to help pave the (path)way, provided tenants tick the necessary boxes when it comes to affordability and credit-worthiness. 
What’s important now is for landlords and tenants to communicate with each other and be open to a different approach – to try and reach a mutually beneficial occupational / lease agreement. 
When opportunity knocks

This unique boiling-pot of macro-economic factors is enough to give one a  Corona-ry but take a deep breath and clear your mind, because it actually presents a real opportunity for those looking to take their first step onto the property ladder - not only is there opportunity for buying well, it is also more affordable than ever before to do so.   And, if owning a property is still not within your means then now is the time to plot a sustainable way forward with your landlord.

Ryan Flowers
Flyt Property Investment


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