Rental rates

[Voicy]

Hi friends,

I'm busy looking at buying vs renting & for now it seems like renting is the better option - considering banks only do loans with repayments under 30% of your monthly income. :/

So anyway, I want to find out from you folks what the going rates are for non-sharing pads. I stayed with a mate for a while sharing a huuuge house after his parents got divorced and I paid R2k a month, which was nowhere close to the value for the place.

Obviously it's area dependent, but let's assume nice areas where you'd all feel comfortable living in.

By looking on property24 / gumtree etc. it seems the going rates for 2 bedroom places are around R4-5k. Is this what you guys are paying as well? The price itself seems a bit steep, but compared to what's out there, it seems to be quite common.

I found a nice place for R5k with 2 bedroom/2 bathroom/double garage in a complex which seems pretty sweet - the owner will get back to me this week. (No I'm not keen on sharing again)

Then lastly, what % of your Nett salary (after debit order deductions are done) do you guys spend on rent?

Thanks for all the input.

 

[Mike Hoxbig]

"Hi friends"? Who are you and wtf have you done with Voicy? :wtf:

Well my bond payments on a 2 bedroom 2 bathroom place are about R6,500. Considered renting it out before moving in, and was getting offers around the R5,500. Area is Randpark Ridge in Jhb, so I'm not sure but it seems like your estimate seems about right.

I would say that 25-30% of your nett is a reasonable figure, but it's entirely dependent on your living costs because lifestyles differ.

 

[supersunbird]

The thing is, the bond payment on the place is probably around R6000 (if its worth R700 000), the levy is probably between R1000 and R1500, and the municipal property tax is probably around R400 to R500.

So to be paying between R4000 to R5000 rent means either the place had been owned a while (10 tears or more - bought when prices were lower so bond is smaller and priced lower) or the owner has put a big chunk of cash in or the owner is not breaking even yet (working at loss) till the rental increases can catch up...

 

[Species8472]

The thing is, the bond payment on the place is probably around R6000 (if its worth R700 000), the levy is probably between R1000 and R1500, and the municipal property tax is probably around R400 to R500.

So to be paying between R4000 to R5000 rent means either the place had been owned a while (10 tears or more - bought when prices were lower so bond is smaller and priced lower) or the owner has put a big chunk of cash in or the owner is not breaking even yet (working at loss) till the rental increases can catch up...

Not really, rental fee is disconnected from property value. You can rent a beautiful 2 bedroom for the same price as a dump (also 2 bedroom) in the same area. Rental is driven by what is average in an area.

@OP, if you can afford to buy a place it is always better in the long run. If you are renting you are putting ~R5k into someone else's pocket. Over 2 years that is R120k that you have _nothing_ to show for! Plus rental goes up every year.

But, buy a place and after 2 years two things have happened: your outstanding bond has become less, and your property value has gone up, yet your repayment stays the same. The longer you rent, the more money you are burning.

Rather settle for a smaller place in a less affluent area than burn money paying for someone's investment.

One thing to note, don't buy in a neighborhood that is going down the drain, you do want your investment to grow in value, so do some research

 

[Paul_S]

Hi friends,

I'm busy looking at buying vs renting & for now it seems like renting is the better option - considering banks only do loans with repayments under 30% of your monthly income. :/

Buying is usually the better long term option (but not always).
The only problem I have with renting is you're paying close to what a bond will cost and at the end of the day you have no equity to show for it.
If you're young (less than 30) and single then it's probably okay but the last thing you want to happen is to reach retirement age and be faced with escalating rental prices that are out of your control.

By looking on property24 / gumtree etc. it seems the going rates for 2 bedroom places are around R4-5k. Is this what you guys are paying as well? The price itself seems a bit steep, but compared to what's out there, it seems to be quite common.

I found a nice place for R5k with 2 bedroom/2 bathroom/double garage in a complex which seems pretty sweet - the owner will get back to me this week. (No I'm not keen on sharing again)

I got married and purchased a house using joint income. I could not do it alone.
I'm paying R6300 per month for a bond and R440 for rates and taxes for a freestanding, 240 sqm, 3 bedroom house, double garage and 1000 sqm property.
Rent would probably be at least R6000 per month so I'm paying an extra R740 for something which will one day be mine (excluding building and property maintenance of course).

Do you really need a double bedroom, double bath and double garage if you're staying alone?
If you rent cheap and nasty maybe you could save up a deposit for a house instead?

 

[Cius]

If you save up a 20% deposit then cost of buying = cost of renting from about year one. In a high inflation environment like SA though I would always recommend buying as every year the cost of your bond effectively comes down by 6% (or whatever inflation is). Seriously. It is tight for the first two years or so after buying especially if there is an interest rate hike but its worth it in the long run. For typical SA conditions. Rent will keep going up, bond will largely stay the same, and then eventually disappear. Hence rent is better for short term gain, bond is better for the long term by far. The only time it is better to rent is if you are moving soon as the costs of selling/buying a house are high.

That is the simple view but there are always exceptions. If you are going to buy and then loose your income the debt could destroy you financially. There are also people who buy a house and then continually extend the bond to go on holiday or "improve their house" and kill themselves that way. People do not realize that if you spent R400K on a R600K house the house value does not magically become R1M. Its probably more like R700K. Still, if you are relatively disciplined at paying off debt fast and buy something that does not require a lot of work/maintenance then buying is wonderful.

If you do buy treat the debt as enemy no 1 and pay it off ASAP. This should not be that hard as inflation is helping you to pay it off here. Once the bond is paid off, hopefully in under 10 years, you can laugh at all the mooks still paying 20-30% of their salary in rent while you are just paying rates/taxes/levies.

 

[Paul_S]

Plus rental goes up every year.
But, buy a place and after 2 years two things have happened: your outstanding bond has become less, and your property value has gone up, yet your repayment stays the same. The longer you rent, the more money you are burning.

Species brings up a very important aspect that few people spot.

My bond has remained the same every year but my salary has increased giving me more disposable income which I now pump into the bond. This shortens the term to 9 years instead of 20.
After 9 years I have a lot of spare cash to [-]play with[/-] invest which wouldn't be the case if I was renting.

 

[reactor_sa]

There was a thread here about the cost of buying vs renting. It worked out cheaper to rent if you don't plan on keeping the property for more than I think 5years.

 

[Voicy]

"Hi friends"? Who are you and wtf have you done with Voicy? :wtf:

Well my bond payments on a 2 bedroom 2 bathroom place are about R6,500. Considered renting it out before moving in, and was getting offers around the R5,500. Area is Randpark Ridge in Jhb, so I'm not sure but it seems like your estimate seems about right.

I would say that 25-30% of your nett is a reasonable figure, but it's entirely dependent on your living costs because lifestyles differ.

Tsek! I'll still kick you inna panty!

I can afford a higher bond repayment, but the bank doesn't think so - hence I must buy a crappy place or rent until my deposit grows.

@OP, if you can afford to buy a place it is always better in the long run. If you are renting you are putting ~R5k into someone else's pocket. Over 2 years that is R120k that you have _nothing_ to show for! Plus rental goes up every year.

This is my general feeling of it as well.

If you're young (less than 30) and single then it's probably okay but the last thing you want to happen is to reach retirement age and be faced with escalating rental prices that are out of your control.

Well that's just it, I am almost 30 & single...and had a brilliant time house-sharing, but when the house became unavailable I moved back with the parentals, where I help them out with bills, groceries, pretty much more than what I was paying on rent living on my own. In return, I'm a stone throw from the beach & hooked up with 4mb adsl (which I'm paying for, but impossible to get line access for dsl at rental units)

I got married and purchased a house using joint income. I could not do it alone.
I'm paying R6300 per month for a bond and R440 for rates and taxes for a freestanding, 240 sqm, 3 bedroom house, double garage and 1000 sqm property.

Rent would probably be at least R6000 per month so I'm paying an extra R740 for something which will one day be mine (excluding building and property maintenance of course).

Do you really need a double bedroom, double bath and double garage if you're staying alone?
If you rent cheap and nasty maybe you could save up a deposit for a house instead?

Well that's just it, I'm single so renting a big place on my own would be cool, but a bit of a waste. In contrast, moving from the comfort zone I find myself in now to a granny flat type place for the soul principle of moving out would be daft. I would like a place with a garage for my car & bike though, so those open parking flats won't work too well.

If you save up a 20% deposit then cost of buying = cost of renting from about year one. In a high inflation environment like SA though I would always recommend buying as every year the cost of your bond effectively comes down by 6% (or whatever inflation is). Seriously. It is tight for the first two years or so after buying especially if there is an interest rate hike but its worth it in the long run. For typical SA conditions. Rent will keep going up, bond will largely stay the same, and then eventually disappear. Hence rent is better for short term gain, bond is better for the long term by far. The only time it is better to rent is if you are moving soon as the costs of selling/buying a house are high.

My issue is not affording the bond repayments on buying a nice place for myself, my problem is the bank doesn't think I can afford a bond more than 30% of my net income. Rather lame considering my perfect credit rating & repayment / cc clearance history & minimal expenditures (2nd car paid off, student loan paid off long ago, no clothing accounts, no cell contract anymore) as well as finally earning a market related income for my engineering qualification.

There was a thread here about the cost of buying vs renting. It worked out cheaper to rent if you don't plan on keeping the property for more than I think 5years.

Yeah I'm not planning on being a renter for long - but as I mentioned, I am almost 30 and it is socially frowned upon to "still" live with your parents at that age (even though I've lived overseas, rented locally & lived in 2 other cities before now) & it's not exactly an attractive feature for the ladies - and with good reason. So in the meantime I am building up a deposit - but of course, the longer I wait, the higher house prices rise as well.

There are some nice places I'd love to get, but they're just in the wrong neighbourhoods (traffic / crime / geographic location / etc.)

Thanks for all the input so far.

 

[Paul_S]

So in the meantime I am building up a deposit - but of course, the longer I wait, the higher house prices rise as well.

Well the good news is that house prices are going to stay depressed for at least another year or two and in fact they've been depreciating relative to inflation since 2008 so you don't have to worry about the property price boom that we had from 2000 to 2007.
Those days will only come back once the global economy is back on it's feet and I don't forsee that happening any time soon judging by what is happening in Europe.

Lightstone create some nice property reports and you can get free reports from their Newsroom http://www.lightstone.co.za/Portal/content/newsroom.aspx