“If you rent, you’re just paying someone else’s mortgage.”
“The most important thing is to just get onto the property ladder as quickly as you can.”
“Buy the biggest home you can afford. You’ll grow into it in time.”
When I was growing up, the major (in fact, only) piece of financial advice that adults drilled into me was that it’s absolutely crucial to try to buy your first house as quickly as you can. More than anything else, buying a house is what made you an adult. And I, with my deep distaste for mountains of admin and home maintenance, always felt stressed that I wasn’t getting onto that fabled property ladder fast enough.
I’m not the only one. South Africans are buying their first house later than ever before, and statistics from BetterBond show that the average age of first-time home buyers has risen from 24 to 36 over the past 20 years.
The reasons for this aren’t that mysterious: we’re facing a youth unemployment crisis and the economy’s been in stagnation for a decade. Most young people are struggling to find their first real paying jobs, let alone save up for a home loan deposit. And changing global patterns of marriage and childbearing probably play a role, too.
But maybe the fact my generation is waiting longer to set down our roots isn’t such a bad thing for our finances.
Despite all the conventional wisdom we hear from our uncles around the braai, buying a house in South Africa has actually been a pretty terrible investment for most people, for many years. In fact, data from the FNB Property Barometer shows that the average house in South Africa has actually lost value against inflation for most of the past decade. So, if you’re planning to sell your house one day and make a fat profit to fund your retirement… then, sorry, you might need a different plan.
(Now, I’m talking here about just buying your own house to live in. Obviously, some people do really well through property investing: usually because they treat it like a side-business, and do a lot of maths and research and develop expertise about the residential property market. And some people just get lucky.)
But the other compelling financial reason to buy a house isn’t to think of it as an investment (something you plan to make a profit on when you sell it), but to think of it as a cost-saving tool. Usually, when you first buy a house, the costs of owning that house every month are higher than if you were renting the same place. But the costs tend to stay more or less the same, while the costs of renting rise every year. And eventually, having owned the house works out cheaper than having rented it.
The thing is, the average person needs to live in one house for at least nine years before that happens.
That’s because the costs of buying and selling houses in South Africa are extremely expensive. You can run the maths on your own situation by playing with Jason Coomer’s excellent Buy vs. Rent calculator.
The average employed South African only stays in a job for about four years. Nine years is a long, long time for a young person who’s still trying to figure out their life and their career and their relationships to commit to being in one house.
So maybe, the fact that young people are waiting a little bit longer before they buy their first home isn’t such a terrible thing, after all.
Take a listen to this week’s episode of the Like a F-cking Grownup podcast, where we interview economist Jason Coomer about the maths of home ownership, talk to Xola Feni, a twentysomething from Cape Town about why he just bought his first house, and get some tips from our very own Kathryn Kotze for negotiating better rental contracts, for those of you who feel you aren’t quite ready to take the home ownership plunge.
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"Censorship of anything at any time in any place on whatever pretence has always been and always will be the last resort of the boob and the bigot." ~ Eugene O'Neill