Looking for Love? Buy a House (The Bugle)

If you are a young professional and looking for love, buy a house. This advise, published in Ooba’s Oct 2012 newsletter results from a recent on-line survey conducted by PropertyGenie.co.za. The poll showed that 75% of respondents view a potential partner as more attractive if he or she owns a home. Only 18% said they did not have a preference, while 4% said partners who rent are more attractive and only 3% said they would prefer a partner who still lives with his or her parents. 

So what will it cost to own your own love nest? One of the best starter home buys currently on the market is a spacious two bedroom, two bathroom apartment at Sunbird Way in Hilltop Estate. It has a huge 46 sqm lock-up garage and the apartment, with patio measures 98 sqm. Taking this property as an example to highlight the difference between the cost of renting vs. buying, we can establish the size of the deposit required, so as to balance total rental cost, after deducting levies and rates, to the total ownership cost. This property would rent at R7,000 p.m. and this would include municipal rates, the body corporate levy and the estate levy. It would exclude the utilities and these amounts are therefore excluded from the comparison. Assuming you are able to secure the property at a favourable purchase price of R1,160,000, the total transaction costs involved in this purchase would amount to R40,000, which would include transfer duty of R20,000, conveyancing attorneys fees of R13,500, and deeds office fees, sectional title levy clearance certificates etc. of approx. R6,500. Your monthly levies would be R1,140 p.m. as the estate levy and R775 p.m. as the body corporate levy. The annual municipal rates on a property valued at R1,160,000 would amount to R5,304.68 or an effective R442 p.m. The monthly levies and rates therefore total R2,357 and should be deducted from the R7,000 p.m. rental option to get a net R4,643 p.m. 

This amount must then be used to ascertain how much mortgage bond this would cover and in turn how much of a cash deposit would be required as a purchase option to compare directly to the rental option from a cash flow point of view. A mortgage bond with a 20 year term and interest rate of 8,5% p.a. in the amount of R535,000 would require a monthly installment of R4,643. The cash deposit required would therefore be R625,000 plus the R40,000 required to cover the total transaction costs. Bond registration costs would be additional. With cash on hand of R665,000, the purchase option of this property is therefore identical to the rental option, and it then makes perfect sense to buy rather than rent. It does remain cheaper to rent the same property than buy it, if you do not have a substantial cash deposit. The best advise to take from this is then to save as much as possible towards a deposit to get to a place where you are not paying off somebody else’s bond.

For details on this great opportunity view: Hilltop Estate - Best Buy!

(Author: Andreas Wassenaar, Published in The Bugle 31Oct2012)