Opt for affordable, smaller if you’re a 1st-time buyer

SIZE matters as the saying goes, and in the case of property in the current economy, first-time buyers are advised to aim for smaller and wiser rather than larger, which will become less affordable.

Residential property in South Africa has already become less affordable to large sectors of the population, says Bill Rawson, chairperson of the Rawson Property Group.

Quoting the respected FNB economic analyst, John Loos, Rawson said in the current “supply constrained” residential market, prices in most categories would continue to rise while employee remuneration growth will probably decline.

FNB’s price-to-average-employee remuneration index as well as their index for instalment payments on a new 100% bond in relation to average employee remuneration both fell by almost 2% in the second quarter of last year.

Aim for affordable

“The average South African’s ability to afford the home of his choice will, regrettably, almost certainly decline further this year. With interest rates on the increase, the indices quoted above will probably look even less satisfactory by the year end,” said Rawson.

In the circumstances, said Rawson, South Africans must seriously consider lowering their targets and ambitions in order to become homeowners and should do all they can to maintain this ambition rather than to be rent payers in perpetuity.

“Survey after survey,” he said, “has shown that, at the lower and middle income groups, investing in a house is the surest way for people to build up an asset.

“Unless they are extremely self-disciplined, no other investment channel performs as satisfactorily for these income groups as does housing.”