The pros and cons of owning and renting for first-time homebuyers in South Africa

Here are some pros & cons of owning or renting a property.

• Rather than merely paying a rental expense, you are investing in a fixed asset which will continue to grow in value as time passes.
• Mortgage repayments are only subject to interest rate fluctuations but will otherwise remain static, while rental rates tend to rise annually.
• At a future point, you could potentially also sell the property and make a handsome profit.
• Owning your own home provides security, and you will not need to move.
• Owning offers the flexibility to renovate and customise it to your own taste and needs.

Cons of owning:

• Owning your own property comes with extra expenses, such as property taxes and maintenance costs.
• You will also need upfront transaction costs and may need a cash deposit as well.
• A drawback is that property as an asset is not particularly liquid, which means it usually takes time to sell.
• The profit that you could potentially make will also depend on the market cycle and whether you held onto it for long enough to accumulate some capital growth.

Pros of renting:

• Renting is usually more affordable compared to buying. You could therefore rent a bigger property, or in an area where you might not be able to buy.
• Renting also offers more flexibility in that you could move within a reasonably short period of time as you could potentially cancel your lease, subject to payment of a cancellation penalty.
• The maintenance, property costs and risks will generally be minimal in the case of a rental.

Cons of renting:

• You will not enjoy the freedom to make changes to the property or to customise it to your needs.
• You will be paying off someone else's property and will have nothing to show for your money at the end of the rental period.
• Rental rates tend to increase annually, which means that in the long term, it usually costs more to rent than buy.
• There is no long-term security as the landlord may decide not to renew your lease or could even decide to sell the property at the end of the lease period.

Ultimately, the decision will depend on your personal circumstances.