Rent or Buy?

You are paying rent every month and people keep telling you it is 'dead money'. Buying feels like the grown-up thing to do. But the right answer depends on your finances, your plans and the area, not on what everyone else says.

What is happening

Renting and buying both cost money. When you rent, you pay rent, and the landlord pays for rates, building insurance, levies and major repairs. You can move easily when your job or family needs change, and your savings can stay free.

When you buy, you pay the bond, which is mostly interest in the early years. You also pay rates and taxes, building insurance, maintenance and levies, plus upfront costs like transfer and bond registration fees. If you sell within a few years, those costs can wipe out any growth in the property's value. Property prices in some areas grow slowly or even fall, so a house is not always a strong investment on its own.

Buying tends to make sense if you plan to stay for many years, have a stable income, a deposit, an emergency fund and a budget that comfortably covers all the costs of owning. Renting can make sense if you might move, your income is uncertain, or you can invest the money you would otherwise spend on buying costs.

As a tenant, the Rental Housing Act protects you. Your deposit should be kept in an interest-bearing account, and disputes can go to the Rental Housing Tribunal in your province for free.

Signs to notice

• Family or friends are pressuring you to buy.
• You are unsure how long you will stay in your area or job.
• You have not added up the running costs of owning.
• Your rent has gone up and you wonder if a bond would be cheaper.
• You have no savings outside a possible deposit.

30-second self-check

Answer yes or no.

• Do you plan to stay in the same area for at least five years?
• Is your income stable and likely to continue?
• Do you have a deposit and money for transfer costs?
• Would owning cost about the same or less than renting once all costs are included?
• Do you have an emergency fund you would not touch for the purchase?
• Are you ready to handle repairs and maintenance yourself?

0-1 yes: Renting is probably the better choice for now. Use this time to save and strengthen your credit record.
2-3 yes: It is close. Run the numbers for your situation before deciding.
4 or more yes: Buying may suit you well. Compare the full costs of owning and get pre-approval before you house-hunt.

What you can do next

• Today: Write down your current rent and what you spend on housing-related costs.
• This week: Use the calculator to compare renting and buying a similar home over five and ten years.
• This month: If buying looks right, check your credit and savings. If renting wins, set up a monthly investment with the money you would have spent on buying costs.
• Whether you rent or buy, get contents insurance to protect your belongings.

Your tool

Rent vs Buy Calculator - compare the total cost of renting and buying a similar home over the years you plan to stay, including upfront costs, maintenance and what your savings could earn.

When to get professional help

Speak to a registered financial planner if you are unsure, and to an attorney if you have a dispute with a landlord or seller. Housing decisions can cause tension between partners and with family, and a counsellor can help if that becomes heavy.
Who can help: FSCA-authorised financial planner, money coach, attorney

Getting help in South Africa

The Rental Housing Tribunal in your province resolves disputes between tenants and landlords for free. The Estate Agency Affairs Board, now the Property Practitioners Regulatory Authority, regulates estate agents. Your Cleared Mind EAP can connect you with a money coach to compare the numbers with you.