The dream for most South Africans is buying a home and not paying rent any more to some landlord.
Owning property is a major step and for most South Africans it is a step that takes time, preparation and in some cases help.
The reality is that buying a house with a partner can be easier, more affordable and better in the long run as the burden of a bond is placed on two shoulders rather than one.
But for those entering the work place, is this an option?
Business Report spoke to three young people who have just entered the job market.
These are the questions we asked them:
1. Will you buy a property with your partner at this time when interest rates are on an upward trend?
2. Do you choose to rent or do you think it is better to invest in a property?
3. If you want to invest in property with your partner, what province would you be interest in, and why?
Nicholas Naicker is a 24-year-old developer in the insurance industry, and he said:
“Yeah, I would. I think property is a pretty valuable investment to have and also provides some security. Being younger and starting out my career, I know I would be on an upward projection when it comes to my job and salary, so I would feel good about buying a property even with interest rates rising.
“Currently I am choosing to rent solely for the fact that I am fairly new to Cape Town and still learning the areas. But having been here for a year I am interested in buying a property soon and think it’s a better option than renting.
“If I was choosing to invest in a property to live in it would be the Western Cape. I work here and generally see myself living here long term, so I would not feel nervous about making a long-term commitment of buying a property. If it was more of an investment property to rent out or make money, I would consider Gauteng, as it’s a better place for an investment property.”
Renier Potgieter is a 24-year-old real estate agent and he said:
“One needs to be aware that there are pros and cons between renting a property, just as there are to owning a home. According to me, and the research I’ve done, both options have their own advantages and disadvantages. For example, renting allows you more expendable money in the short term, while owning a house gives one the sense of security as it is considered a long-term investment.
“For now, since me and my partner recently relocated to the Western Cape, we choose to rather rent until we find the safest and perfect location as close as possible to our work. With the high cost of fuel, I think it is important to keep that in mind.
“Definitely the Western Cape. My reasons for this are that both me and my partner feel safe here. The lifestyle in the Western Cape is very different from that we experienced in Gauteng. I would prefer to invest in a property in the Western Cape, as a first-time home owner, since I am of the opinion that one will get value for your investment in this beautiful province.”
Nonela Nyongo, age 26, is a developer in the insurance space and said:
“Yes, even with the concerning hike of the interest rate, we would still invest in a property within our financial means. The most important thing would be to ensure we do not over-extend ourselves and are prepared for the fluctuation of bond repayments over time. This would mean ensuring that the property I purchase has repayments that are below what I can actually afford.
“For me, as a young professional working in a city where rent costs are extremely high, purchasing property feels like the better option. I do not have children so I do not require a big space and there are scenarios where my bond repayments could be the same or slightly higher than paying rent. I feel that if the cost of renting is so closely aligned with the cost of purchasing, then purchasing is better because then at least you are investing in your own asset and although you may not be receiving a rental income (because I will be the one staying in the property), there is opportunity for a rental income in the future.
“The Western Cape would interest me as I live in Cape Town. I intend to stay in Cape Town for many years and an initial investment in property would have to be close to me so I can monitor it and ensure that the property stays in good shape.”
WHAT DO THE EXPERTS SAY
MortgageMe said in a statement that for married couples entering into a joint purchase may be entirely natural, with any unforeseen circumstances being covered by prenuptial agreements, as long as they have carefully thought through the marriage contract. But when friends, siblings, parents and children or an unmarried couple enter into such an arrangement, it is just as important to ensure a watertight contract is in place to cover all eventualities.
“We should never be lulled into a false sense of security because we are related or in love with our purchasing partner; life may throw any of us a curve ball at any time and the circumstances of one or other or both the partners may change,” said Andrea Tucker, director of MortgageMe.
“Drawing up a partnership agreement may not feel very conducive to a harmonious relationship, nor very romantic for couples, but life happens and we must be realistic in creating a document which protects both parties equally.”
Not all parties, however, are necessarily equal. This may be a 50/50 arrangement or there might be disproportionate contributions by each of the partners, depending on the individuals and circumstances at play, the property company said.
“Purchasing partners can decide whether to ‘pool’ their salaries or contribute to the property proportionately to their individual earnings. Financial institutions are very amenable to granting mortgages to more than one party for a single property, providing each complies with their qualifying criteria, which includes having a good credit standing,” Tucker explained.
WHAT EACH PARTY BRINGS TO THE TABLE
“In the offer to purchase and more importantly, on the title deed, the shareholding of each person should be recorded, and this will go a long way to mitigating any issues when the time to sell the property comes. If the shareholding transfers into one of the names only, it’s important to be aware that a lawyer would need to do this and that costs will be incurred,” Tucker said.
DISSOLUTION
“How you will dissolve the partnership and divide any proceeds of the sale needs to be included in the contract. Property is not a short-term investment, so forward thinking is imperative. In other words, make sure you have an equitable exit strategy,” Tucker advised.
BUSINESS REPORT