Rebecca writes: I am a 36-year-old professional and single mother of two. I had planned that this would be the year that I would buy my own modest home. I have been listening to financial experts on TV saying that first-time home buyers must delay buying due to the economy. However, I feel that for me waiting is not an option. Besides I have not seen property prices declining in a long time, if ever. If I wait I risk never being able to own my dream modest home in a good location. I do not want to compromise on a location of the property as it is very important for me.
I earn R25 000 per month and save R3 000 every month into RSA Retail savings bonds account and have saved R110 000. I have a good credit rating. Would it be wise for a person in my income bracket to buy property now?
Tommy Nel, head of credit at FNB Home Loans replies:
The decision to buy a house should start with whether or not you can afford the property and what the impact of rising interest rates would be.
I would always advise potential home owners that, when considering an investment into property, one should always do so on a long term basis. Trying to time the property price growth cycle is not really that relevant if one has a really long-term investment horizon, especially if you consider the emotional benefits of owning a home that you can call your own.
While a drop in house prices can never be ruled out completely, and some challenges are definitely lying ahead for SA consumers, as long as you can still make your monthly budget work if interest rates increase by 1-2%, I would unreservedly recommend that you commit to entering the property market.
It is still considered fairly unlikely that property prices will drop in nominal terms in the next year or so, and even if they do, on a 20-year plus basis it is really not that relevant. It may well be that a better buying opportunity could present itself in 6-12 months as further interest rate increases may cause stress to some home owners, but again it is not always possible to predict these things with a great level of certainty and if you feel that you can afford the homeloan repayments even if interest rates were to increase some more, then perhaps now would be a good time to make the leap into home ownership.
It is important though to update your budget for any additional costs relating to owning your own home as opposed to renting. I would recommend doing a budget starting with income, less all expenses that you would have as home owner. You must remember about expenses such as levies and rates and taxes that you would not have had to bear as a tenant.
This article first appeared in City Press.