Renting vs. Buying: The Eternal South African Debate

There is a specific phrase that gets thrown around at almost every Saturday afternoon braai in South Africa. You are standing there, holding a chop, and your uncle asks, “So, are you still renting?” When you say yes, he shakes his head and drops the bomb: “Ag, shame. You know rent money is dead money, right? You are just paying someone else’s bond.”

It stings. It makes you feel like you are failing financially. But here is the truth: That uncle is repeating advice from 1990. The economic landscape has changed. With interest rates hovering at 14-year highs, levies skyrocketing, and municipal rates climbing faster than our salaries, the answer is no longer black and white.

I’m Nolan, and today I want to liberate you from the guilt. Renting vs. buying is not a battle between “smart” and “stupid.” It is a battle between “flexibility” and “stability.”

In this guide, we are going to look at the cold, hard math of the South African property market. We will strip away the emotion and help you decide whether you should sign a lease or sign an Offer to Purchase.

The Case for Buying: The “Forced Savings” Plan

Let’s start with the dream. Buying a home is a milestone. It means you can paint the walls whatever colour you want, drill holes for your TV without asking permission, and nobody can sell the house out from under you.

1. Asset Building (Equity)

The strongest argument for buying is that you are building an asset. Every month, a small portion of your repayment goes towards paying off the capital debt. Over 20 years, you own the house. It is a form of “forced savings” for people who struggle to save cash.

2. Inflation Hedge

If you get a fixed-rate bond (or eventually pay it off), your major housing cost stabilizes. Rents generally go up by 6-10% every year. A bond repayment (assuming interest rates stay stable) eventually becomes “cheaper” relative to inflation over time.

3. Leverage

Property allows you to use the bank’s money to grow your wealth. You put down R100,000 (deposit), but you get the growth on a R1,000,000 asset.

The Hidden Costs of Owning (The Silent Killers)

However, when debating renting vs. buying, most people only look at the bond repayment. This is a fatal error.

The Bond is the minimum you will pay. Rent is the maximum you will pay.

If you buy a Sectional Title unit (a flat or townhouse), you must factor in:

• Levies: These cover security, garden services, and insurance. In complex estates, this can be R2,500+.
• Rates & Taxes: Paid to the municipality for refuse and roads (R800+).
• Maintenance: When the geyser bursts on a Sunday, you are the landlord. You pay the plumber.
• Bond Registration & Transfer Costs: To buy a R1.5m house, you need roughly R90,000 in cash upfront for lawyers. That is money that disappears; it doesn’t go into the house.

You can use the Ooba Home Loans Calculator to see exactly how these extra costs inflate your monthly commitment.

The Case for Renting: Paying for Freedom

Now, let’s defend the renters. Renting is often seen as “throwing money away,” but sophisticated investors see it as “buying flexibility.”

1. Mobility (Semigration)

We live in a volatile country. Maybe you get a job offer in Cape Town, or you decide to emigrate, or the neighbourhood deteriorates.

• The Renter: Gives 20 business days’ notice (under the CPA) or waits out the lease, packs up, and leaves.
• The Owner: Is stuck. Selling a house takes 3-6 months. If the market is down, you might sell at a loss.

2. Predictable Costs

As a renter, you know exactly what your expense is. R8,000 is R8,000. If the roof leaks, you call the landlord. If the levies go up, the landlord pays. This stability is crucial for anyone mastering personal finance in SA who needs to budget tightly to clear debt.

3. The “Invest the Difference” Strategy

This is where the math gets interesting. Often, renting a property is cheaper than buying the exact same property.

The Scenario:

Imagine a 2-bedroom loft in Fourways.

• Market Price: R1,200,000.
• Monthly Bond (at 11.75%): ~R13,000.
• Levies & Rates: ~R3,000.
• Total Cost to Buy: R16,000 per month.
• Market Rental: R9,500 per month.

The Gap: R6,500.

If the renter takes that R6,500 saving and invests it in a good ETF (Exchange Traded Fund) every month for 20 years, they will often end up with more liquid cash than the homeowner has in house equity.

• Note: This only works if you actually invest the difference. If you spend it on takeaways, the homeowner wins.

Nolan’s 5-Year Rule

If you ask me, “Nolan, should I buy?”, my first question is: “Will you stay there for 5 years?”

Buying property is expensive due to the upfront fees (Transfer Duty, Bond Costs). It typically takes 5 to 7 years of capital appreciation just to break even on those costs.

• If you plan to move in 2 years: Rent.
• If you are settling down for the long haul: Buy.

The Interest Rate Risk

In South Africa, most bonds are “Variable Rate.” This means if the Reserve Bank hikes the Repo Rate, your repayment goes up immediately.

We saw this recently. People who bought in 2020 at 7% interest are now paying nearly 12%. On a R1.5m bond, that is an increase of almost R4,000 per month in pure cash flow shock.

Renters are shielded from this during their lease period.

Check the latest interest rate trends on Property24 to understand the current lending climate before you commit.

Comparison Table: The Monthly Reality

Let’s look at a R1,000,000 property.

The buyer is paying R6,700 premium for the privilege of ownership. Is the asset growth worth that cash flow hit? That is the question you must answer.

Government Help: First Time Buyers (FLISP)

If you decide to buy, do not leave free money on the table.

The Finance Linked Individual Subsidy Programme (FLISP), now called “First Home Finance,” is a government subsidy for first-time buyers earning between R3,501 and R22,000 per month.

• Depending on your income, you could get a lump sum (e.g., R50,000) to reduce your bond or pay your deposit.
• You can check if you qualify on the BetterBond website or the official government portal.

Buying to Let: A Different Beast

Some people say, “I’ll buy it, live in it for a bit, and then rent it out.”

Be careful. As we saw in the table above, the rent (R8,000) often does not cover the total cost (R14,700). You will have to “feed” the property R6,700 every month. Unless you have deep pockets, this negative cash flow can ruin you.

It’s a Lifestyle Choice

So, who wins the renting vs. buying debate?

Neither.

• Buy if: You have a stable job, you love the area, you want to put down roots, you have saved a deposit, and you can afford the “hidden costs.”
• Rent if: You want freedom, you are building your career, you want to invest your surplus cash in diverse assets (like shares), or you simply don’t want the headache of fixing a burst geyser.

Don’t let the “dead money” myth pressure you into a 20-year debt sentence you aren’t ready for. Financial freedom is about having choices, and sometimes, the smartest choice is to sign a lease.

FAQ: Renting vs. Buying

Is it better to pay off my bond or invest?

With interest rates currently high (~11.75%), paying extra into your bond gives you a guaranteed “return” of 11.75% (by saving interest). It is hard to find a low-risk investment that beats that. For most people, paying off the bond is the safest bet.

What is the “1% Rule” for maintenance?

It is a rule of thumb that says you should budget 1% of the property’s value per year for maintenance. On a R1.5m house, that is R15,000 a year (or R1,250 a month). If you don’t spend it this year, keep it for when the roof needs painting next year.

Does renting hurt my credit score?

No, but it doesn’t help it as much as a bond does. Paying rent isn’t always reported to credit bureaus (though some agents do now). Paying a bond is a “secured loan” and boosts your score significantly if paid on time.