For many years, owning a home has been seen as a major financial achievement. It has often been viewed as a symbol of security, success and reliability in building wealth, says Bertie Nel, head of financial planning at Momentum.
However, rising property prices, higher living costs and changing lifestyles are causing many people to rethink whether buying a home is always the best financial decision. While property can still be a good investment, it's important to consider whether it suits your current circumstances and financial goals.
According to Nel, the traditional advice was to buy a property as soon as you could afford the deposit. Today, the situation is more complicated.
"With higher interest rates, increasing living expenses, and rising municipal costs, owning a home has become more expensive. Property can still help you build wealth, but it should be part of a broader financial plan and not the only investment you rely on," says Nel.
Statistics South Africa's Census 2022 provides the most comprehensive national picture of household tenure. It found that 41.6% of households lived in homes that were owned and fully paid off, while 6.6% lived in homes that were owned but not yet fully paid off. A further 23.2% of households rented their homes.
These figures demonstrate that renting is not a marginal feature of South Africa's housing market. Millions of households rely on rental accommodation.
So, should a home a person lives in, be their biggest investment?
A different way to think about homeownership
Some younger buyers are already separating the decision about where to live from the decision about where to invest.
Regard Budler, CEO of BetterSure, told The National writer, Given Majola, that the growing “rentvestor” approach, in which millennials and Gen Z rent in areas that suit their lifestyles while buying property elsewhere as an investment.
“Owning a home no longer necessarily means living in it,” Budler said.
The idea is significant because it challenges one of the oldest assumptions about personal finance: that the best property investment is necessarily the home you live in.
But rentvesting is not a magic solution. It means becoming a landlord and taking on risks ranging from vacancies and maintenance to tenant problems and unexpected costs.
Buying versus renting: a different picture
The cost of owning a home is about more than just paying a bond each month. Homeowners also need to pay rates and taxes, insurance, maintenance costs and levies, which can put pressure on their budgets, says Nel.
He says as a result, more people are choosing to rent by choice, not because they cannot afford to buy. Renting can offer more predictable monthly expenses and allows people to invest their money elsewhere.
On the other hand, buying a property allows you to build equity over time and benefit from any increase in the property's value, according to Nel.
But neither option automatically produces wealth. A homeowner builds equity through loan repayments and potential capital growth, while a renter only benefits financially from renting if the money saved is used productively elsewhere.
Nel says the decision should not be seen as a competition between buying and renting.
"Both options can work well, depending on your personal situation," he explains. "It's important to remember that property is not a liquid asset. You cannot easily turn it into cash when you need money urgently."
He adds that a common mistake is putting all available money into a home. While this may increase wealth in the long term, it can leave people with valuable assets but little cash available for emergencies.
A healthy financial plan should include a balance between property, emergency savings and retirement investments, he says.
This is the calculation that is often missing from the emotional buy-versus-rent debate. Buyers need to look beyond the bond repayment and consider the deposit, interest, rates, insurance, maintenance, levies and transaction costs. Renters, meanwhile, need to consider what they are doing with the capital they have not committed to a property.
Affordability is about more than the house price
The affordability question has also become more complicated. In previous reporting, property economist Francois Viruly argued that affordability cannot be judged simply by comparing house prices with household incomes. Other unavoidable costs, including transport, electricity, municipal charges, water and insurance, also affect what a household can realistically afford.
That matters because a property that looks affordable on a bond calculator can become considerably more expensive once the full cost of ownership is included.
Growing demand for flexible living
As people's lifestyles change, so do their housing needs. Sectional title developments, security estates and shared ownership options have become increasingly popular, he says.
According to Nel, these options appeal to first-time buyers, professionals and families looking for convenience, affordability and security.
For example, sectional title ownership often includes levies that cover security and external maintenance, reducing some of the responsibilities that come with owning a standalone home.
But sectional title does not mean cost-free ownership. Buyers also need to understand monthly levies, possible special levies and the financial health of the body corporate.
These property models reflect a growing demand for flexibility, convenience and community-focused living.
Property decisions and life changes
Nel says buying a home is not only a financial decision. Major life events often influence whether it makes sense to buy a property.
Getting married, having children, changing jobs, relocating or getting divorced can all affect the type of home you need and what you can comfortably afford.
"There is no single 'right time' to buy property. What matters most is whether you are financially ready," says Nel.
For example, a young professional who expects to relocate in the next few years may find that the costs of buying and selling a property outweigh the benefits. In contrast, a growing family looking for long-term stability may benefit from owning a home, he says.
Without considering your plans, you could end up making a long-term property commitment that limits your flexibility.
The questions buyers should ask
Experts say prospective homeowners should look beyond the monthly bond repayment and consider:
- Can I afford the full cost of ownership, not just the bond?
- Will buying leave me with enough money for emergencies?
- Am I still able to save adequately for retirement?
- How long am I realistically likely to stay in the property?
- What happens if rates, levies or maintenance costs rise?
- If I rent instead, will I actually invest the money I am not putting into a home?
- Am I buying because the numbers make sense, or because I feel I am supposed to own a home?
Why professional advice matters
Because buying a home is one of the biggest financial decisions most people will make, it is often helpful to seek professional advice, says Nel.
A financial adviser can help you look beyond the emotional appeal of a property and determine whether it fits into your overall financial plan.
He says they can assess affordability, debt levels and the potential impact on long-term goals such as retirement.
"When a home purchase supports your broader financial goals, it can become a valuable asset that contributes to long-term financial security," says Nel.
For some households, buying will be the right decision. For others, renting may provide the flexibility to invest elsewhere. The smartest choice is not necessarily the one that leaves you with a title deed. It is the one that leaves you financially stronger.
dieketeng.maleke@nationalmg.co.za
THE NATIONAL