Author : Homeloans SA
Owning a Property is the largest single achievement anyone can aspire to. This article covers the ‘Investment’ Aspect relating to Property Ownership.
Advantages of Owning your Own Home
During 1891, Pope Leo XIII wrote the Rerum Novarum, an open letter to his bishops, in which he stated that: “It is surely undeniable that, when a man engages in remunerative labour, the impelling reason and motive of his work is to obtain property, and thereafter to hold it as his very own.”
But, as some would argue, what are the advantages of spending so vast a portion of the fruits of one’s ‘remunerative labour’ on the ability to say: “I own my own home.” And, does owning your own home not come with its own set of challenges?
Well, of course there are some challenges. You will have to reach deep into your pocket for legal fees, duties, mortgage repayments, rates and taxes and for all those bits ‘n pieces necessary to keep your home in shipshape. And, when you decide that it is time to move on, you will have to deal with the selling process and the inevitable CGT (Capital Gains Tax) that follows.
However, there are advantages too – some financial and others purely feel-good. If there weren’t, property ownership would hardly have been as popular as it is today. We now take a brief look at a few things that make owning your own home an absolute pleasure.
Property Appreciates in Value
Property is, and has always been, a sound longer term investment. If you bought an average home in the middle segment of the market for R 500,000 at the beginning of 2002, the house will probably be able to fetch R 1,179,889 right now. This makes for a good investment, in any language.
Property pricing tends to continue growing, regardless of whether the property market is up or down. When, during 2004, the property market reached the peak in its current cycle, the nominal year-on-year growth in house pricing was 32.3%. Now, in spite of the property market being close to the bottom of its current cycle, we are still experiencing nominal year-on-year growth – albeit at a humble 7.8%.
Equity is that portion of a property that is not encumbered by a mortgage. Your property’s equity not only increases as the debt on the principal portion of your home loan decreases, but it also increases in concert with the appreciation of your property.
Having equity is very useful. You can convert the equity of your home into cash, you can employ the equity to secure credit or, when you sell, use the equity to purchase a more valuable property.
You cannot build equity on a property if you are renting it. If you rent instead of buying, you are helping someone else build their equity.
Your Financial Position
Owning a property improves your likelihood to secure credit. The two most important reasons for this are: Property ownership is considered indicative of stability when lenders apply their in-house scoring systems, and making your mortgage repayments on time every time, improves your credit rating at the credit bureaus. Over and above that, lenders consider property the best security possible when it comes to extending credit.
Mortgage payments can be more predictable than rental payments. If you opt for a fixed interest rate mortgage, you have the luxury of knowing exactly what the minimum instalment will be for the next couple of years. If you rent, the rental payment is not only likely to increase each year, but you also – in most cases – by an unknown amount.
Owning you own home offers you a few indulgences that renting precludes you from.You can watch your garden grow and blossom until you decide it is time to move on; change the paintwork to a different colour; install new carpets and have new curtains custom-made to fit your windows exactly.
Finally: you can experience the pride that comes with buying something tangible and valuable with your hard earned money, and the peace of mind that comes with providing your family with security and stability.
These feel-good advantages are priceless.
The dream of owing a home is still as alive today as it was when the Working Man’s Pope, Leo XIII, penned his words of property wisdom in the late 19th Century. When you look at all of these advantages, it is not difficult to understand why.