Embracing Rental Living in a Time of Rising Interest Rates
Category Just Imagine Properties Team
South Africa's Reserve Bank recent decision on the 25th of May 2023 to lift its Repo rate to a 14-year high of 8.25 percent and Major Banks increasing their Prime lending rate to 11.75 percent has rippled through various sectors of the economy, affecting the decision-making processes of many South Africans, especially those contemplating homeownership. Yet, in the midst of such changes, another viable option often overlooked comes into sharp focus - renting.
Barthlo Barnard, a property expert from Just Imagine Properties, presents a contrarian perspective. "There's an inherent belief that homeownership is always superior to renting. But in times of economic fluctuations like these, renting might actually be a sensible choice for many," explains Barnard.
The logic behind Barnard's perspective is rooted in financial and lifestyle flexibility that renting can provide, particularly in an uncertain economic climate.
Firstly, renting can offer financial flexibility. As interest rates rise, so do mortgage repayments. This could place a significant strain on homeowners, especially those with adjustable-rate mortgages. Renters, in contrast, are insulated from such economic tremors - at least until their lease is up for renewal. This predictability in housing cost can be especially valuable when other elements of the economy are uncertain.
"Renting provides a certain level of insulation from the immediate impacts of interest rate hikes," Barnard notes. "This provides tenants with the opportunity to save more, invest in other avenues, or simply keep their finances stable during turbulent times."
Moreover, with the increased interest rates, property prices could potentially slow down or even drop, making it a less opportune time for potential buyers to invest in a new home.
Secondly, renting offers lifestyle flexibility. In an era where job markets are increasingly volatile and remote work opens up possibilities to live almost anywhere, the commitment of homeownership can feel restrictive. Renting allows individuals to move for job opportunities or personal preferences with relative ease, without the burden of selling a house or the cost associated with maintaining it.
Finally, renting also provides the opportunity to live in areas where buying might be financially out of reach. Renters can enjoy the amenities of prime locations, such as city centers or sought-after school districts, at a fraction of the cost of buying a home in the same area.
In closing, rising interest rates bring about a new set of challenges and opportunities. While homeownership is indeed an aspirational goal for many, it's important to remember, as Barthlo Barnard of Just Imagine Properties puts it, "Every financial climate brings its own set of opportunities. In times of rising interest rates, rental living could be a savvy and flexible choice to navigate the financial landscape."
Author: Barthlo Barnard
