Rent vs buy: what R12K gets you

With interest rates rising to near pre-Covid levels, many might be contemplating whether it is better to purchase or to rent. One way to decide what best suits you is to compare the possible monthly bond repayments with the corresponding rental prices.
Regional director and CEO of RE/MAX of Southern Africa, Adrian Goslett, explains that there are advantages to both options. “Renting offers the tenant a certain amount of flexibility while buying a home can provide the owner with an asset that will earn him/her a substantial return on investment. Each individual needs to evaluate their circumstances and make the decision that meets their needs,” he advises.
To help individuals get an idea of what their money can buy them, RE/MAX of Southern Africa shares a few examples of rental prices compared to house prices across the country.

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Gauteng
On a R1.5m bond, the repayment is roughly R12 000 per month. For that amount, Nadia Aucamp, broker/manager of RE/MAX All Stars, explains that a buyer can purchase “a standard (possibly not modern) three-bed, two-bath house in areas such as Verwoerdpark, Raceview, Florentia or a three-bedroom, two-bathroom townhouse in Meyersdal, New Redruth or Brackenhurst”.
For the same monthly repayment, she suggests that a tenant can rent a three-bedroom, two-bathroom townhouse that is roughly 150m² with a single garage in areas such as New Redruth, Meyersdal and Randhart in Alberton. “In Germiston, tenants might be able to get more value for your money on a 200m², three-bedroom, two-bathroom house in Lambton, Albemarle and Dinwiddie.”
Cindy Brits, broker/owner of RE/MAX Dazzle adds that there are currently 31 properties for sale in Kempton Park in the R1.5m price bracket of which 29 are free-standing houses, one is a cluster and one is a townhouse. In Benoni in the same price bracket, there are significantly fewer properties available; nine in total of which five are free-standing houses, one is a cluster and two are townhouses.
For the same monthly cost of a bond repayment on these homes, Brits explains that a tenant will be able to rent decent accommodation in this rental bracket. “In a suburb like Glen Marais, for R12 000 per month in rent, the expected home will be in the region of 250m² will have three bedrooms, two bathrooms, a double garage and quite a substantial size garden. Another option at this amount will be an 83m², two-bedroom apartment within an estate such as Serengeti Golf and Wildlife Estate.

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“Since the hard lockdown, we noticed more buyers than sellers in the market owing to the low-interest rates. After the 0.75% interest rate increase, we predict that the market will slowly turn and more properties will be placed on the market and there will be fewer buyers due to affordability and the rising costs of living. This will ultimately make rentals a much more attractive option,” says Brits.
Aucamp agrees, adding that “with the recent interest rate increase, the market is shifting back to the earlier position of rentals being more affordable to bond repayments”.
Final advice
As a final consideration, Goslett compares house price appreciation against annual rental escalations. “While you could be paying R8 000 for a home in year one, you could end up paying as much as R17 000 on the same home in 10 years if we assume a 9% annual increase.
“This is compared to annual house price appreciation which is currently sitting at roughly 4.46%, which means that you can sell the property for much more than you originally bought it for. Deciding what is the best option for you is not always easy. If you’re grappling with this decision, get in touch with a trusted real estate advisor to explore what you can afford,” he concludes.

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