The current interest rates are driving up demand among first-time buyers and it is not difficult to understand why. At the current rate, buyers can afford to purchase homes they might never have otherwise qualified for.
According to bond originator, BetterBond, with the interest rate at 7%, a buyer would need to earn about R26 000 to qualify for a bond to buy a home of just over R1 million. The monthly instalments would be about R7 800. Last year, when the interest rate was at 9.5%, someone with the same salary would only have been able to afford a home of just under R900 000.
Despite this potential savings, Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett, explains that most people end up purchasing property with their hearts rather than just their minds. “It is the lifestyle benefits rather than the potential financial benefits of homeownership that tend to have more sway among buyers who are uncertain about whether they are ready to purchase a home of their own,” he explains.
For example, those who were previously tenants might be more swayed by the fact that homeownership provides the freedom to express one’s unique style and completely customize the interior and exterior spaces of the home. “Homeowners no longer have to abide by regulations regarding wall colours or hanging art. They can remodel and renovate the home as they see fit. This can be an incredibly liberating experience for first-time buyers,” he says.
Beyond this, owning a home provides buyers with a sense of stability that renting simply cannot offer. “Owning your own home means that you have a place in which to cross milestones and create lasting memories with your family. You do not need to stress about whether the landlord will renew your lease or push up the rent to beyond what you can afford. Homeownership provides you with the security to mark your children’s growth against the door frame without worrying about whether you’ll still be there to track their progress by their next birthday,” says Goslett.
This brings up the next reason why many are swayed into home ownership. “Many first-time buyers make the decision to purchase a home simply because they have outgrown their previous living space. Renting an apartment makes sense when the person is young and their possibilities are endless. But, once they have settled down into a career and maybe even had a family of their own, homeownership becomes far more appealing,” Goslett suggests.
As a final consideration, Goslett highlights the fact that the monthly costs associated with homeownership is similar to what a tenant would have paid in monthly rent. “Only this time, the payments contribute to a property that is his or her own appreciating asset. The closer they get to paying off the home loan, the more they contribute towards their own personal net worth,” he concludes.