Only the good buy young!
Making your move in the property market ASAP is a really smart move — even for young singletons taking their first steps on a career path.
Many Gen X, Y and Z young adults are holding off on buying their first property until they've settled into a new job or got married. While it's often wise to wait, you may lose out on a real opportunity to build real wealth, real soon.
It's true that, as a young person, you may be a prime candidate for company transfers, especially if you're single and newly-qualified. You may also be worried about getting 'stuck' with a property that your future partner won't like or that won't fit a future family.
But a residential property is not just a place to live. It's also an asset that appreciates in value — unlike cars, clothes, furniture and other cool stuff that young people like to buy. And it's a great savings mechanism.
According to the FNB House Price Index, property prices in SA are currently 90.8% higher, in real terms (after inflation), than they were in 2001. What this actually means is that the buyer who bought a R1 million property with a R100 000 deposit (investment) in 2001 would have made a return of almost 1000% on that initial investment. And the younger you are when you buy, the more chance you have of enjoying such lovely long-term returns.
And if you put any spare cash you have into your bond account, not only will you get a better rate of interest (tax-free!) than you would if you deposited the money in a savings account, but you could also cut thousands of rands off the total cost of your home by paying it off early.
BetterBond CEO Carl Coetzee believes that, "as long as a home is increasing in value and the bond is decreasing, you're actually building up equity in your property, which can be used as security for other investments, for emergency funding or as a deposit for another property. This kind of wealth creation obviously doesn't come your way when you're renting!"
Now is a good time to buy, because prices are highly negotiable, and the banks are quite keen to lend to homebuyers. But young buyers do still need to be careful not to over-extend themselves financially. Get a reputable bond originator on board. Get pre-approved — it's the best way to find out how much you can comfortably afford to spend. And do your homework: find out what it takes to run and maintain a property — those hidden costs! — before you make your move.