Renting: A Viable Option Amid Hiked Interest Rates
Category Advice
When deciding on whether to buy or rent your next home the golden rule is “location”. However, the South African economy in 2016 has taken a nose dive and we are currently witnessing rising inflation and interest rates, slow economic growth and a notable decline in expendable income. These factors have led to the rental market becoming a practical and smart option. In the past, renting was considered a means to an end or a short-term plan but this is no longer the case. The good news is that there is an array of renting benefits available that provide flexibility and affordability in tough economic times, such as:
Increased Savings and Spending
Considering the high costs in owning a home- rentals represent a cheaper option. The tenant is liable to only pay a fixed monthly rent, and in most cases water and lights. This allows for budget efficiency due to a higher expendable income to save or spend. When buying a home the standard deposit accepted is 10% of the purchase price. A rental deposit is significantly less and is typically equal to one month’s rent. The high deposit price on buying a home is the main reason why many hopeful homebuyers remain on the rental market as they cannot come up with a large deposit to aid their home loan application or meet the bank’s deposit.
Protection against a volatile market
There notable financial benefits to renting. Monthly rentals will only increase once a year whilst bond repayments depend on interest hikes. This year, The Reserve Bank increased lending rates by half a percentage point meaning South African homeowners will fork out more money to repay their loan.
Convenience and mobility
Renting is convenient and offers mobility. Should you change jobs, suburbs or cities vacating the rental property is easier compared to an owner needing to sell their property. A tenant can leave a home at the end of the lease period or after completing their notice period.
The basis of a lease agreement
For those who are choosing the option to rent and have found a potential home- a lease agreement becomes an integral document between you and your landlord. A lease agreement is a mutually reinforcing contract between a tenant and a landlord that stipulates clear rules and obligations of each party concerned.
A reliable lease agreement needs to include details regarding allowances and restrictions within the property for both the landlord and tenant, property maintenance, the amount of rent, deposit and other fees, and finally the ways in which the deposit will be implemented and when it will be paid back. Lease agreements have a tendency to be misunderstood, whereby many people interpret it to exclusively protect landlords and their properties.
This is a misinformed judgement because sound lease agreements serve to assist both parties involved, equally. A sound lease agreement protects tenants by: Ensuring proper maintenance, maintaining personal privacy and protection from unlawful evictions. It is important to note that according to Section 23 of the Constitution, “No one may be evicted from their homes, or have their homes demolished, without an order of court made after considering all the relevant circumstances.”
As mentioned renting does come with a range of benefits to steer you through the weakened economy by increasing savings and spending. Although buying a home is accompanied with wealth accumulation including long-term investment and security benefits, the current times are calling on consumers to seek
cost effective options such as renting and current trends reaffirm that this trend is growing.
Author: Dormehl Property Group
