To rent or not to rent.
Most people's dream is to own their own property - it provides a sense of security, no landlord to worry about, and an asset that may provide a return on investment when you choose to sell.
However, renting may be your best option if you cannot afford to buy a house, put down a sizeable deposit if necessary, or qualify for financing.
It is also important to consider how long you intend to stay in the house you buy. If you stay in a house for less than six years, you have to consider if the capital amount plus interest and any initial costs paid for financing1 when you bought the property will be regained when you sell. Another consideration is the further loss incurred for costs when you purchase another property.
The property market has been flat since the financial crisis of 2008, which impacted the global economic market. Many believe that the property market corrected itself as the property boom pre-2008 was creating overinflated prices, especially in medium housing prices.
Although house prices have remained flat, and the market described as a "buyer's market", medium priced houses are taking longer to sell. Houses are staying on the market for longer, with sellers having to reduce their prices repeatedly in the hopes of making a sale. As of January 2013, the prime lending rate was 8.5%; the last time it was at this level was 1967. If an unexpected relocation, divorce or retrenchment becomes a reality, or the prime interest rate suddenly starts hitting higher levels that make your bond repayments impossible, sitting with a house on the market with the intention of a quick sell could become a nightmare.
Renting may be your best option if you know that you need to relocate for work or you may have children in the near future. Another important consideration is: could you afford your bond repayments if prime increased by more than four percent.
Getting out of a lease is easier and quicker than waiting for a property to sell. In other words, renting provides flexibility and faster relocation than owning.
However, if you do qualify for financing1 and intend to stay in your property for a substantial amount of time, are prepared to ride out the current slump in house prices, and can comfortably pay whatever the prime interest rate does, buying will provide you with an asset that will hopefully provide a return on your investment.
Be honest about your current financial position and choose the best option for you. If ownership is not a viable alternative now, find an affordable rental, invest3 the savings towards a deposit, and buy the house of your dreams when you can afford it.