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To Buy or To Rent, That is the Question

Most financial advisors are agreed that it is wise to get into the property market as soon as possible in order to start paying off your own bond rather than pay rent and pay off someone else's bond.

However the property boom in South Africa over the last few years, which has pushed house prices sky high, has made buying a home increasingly difficult for many first-time buyers. Angelo Haggiyannes, director of Auto & General Insurance, says that while it has always been relatively common for couples to pool their income and buy a property together, now friends are doing the same in order to be able to enter the property market.

He says, "First time buyers must be aware that buying a home has many hidden costs, insurance being one of them, along with legal fees, registration costs and even moving costs. The owner of a bonded house is legally obliged to get House owners' Comprehensive Insurance, which covers the property as security for the home loan in the event of fire, flood or any other disaster that damages the structure and fixtures. In addition, whether you are buying or renting your home, household contents insurance is a must today. The risk of burglaries remains high and many uninsured victims of theft find themselves in real financial trouble and unable to get back on their feet after losing their household possessions."

However, if you can easily afford your bond repayments and if you manage to pay off your bond quickly, your investment will become a true investment - hopefully paying great dividends. For one thing, owning a home, with no monthly bond repayments to cough up for, is the ideal situation for anyone.

The "To Rent" camp believes that renting can provide you with a more cost-effective option, particularly if you are young and need flexibility to travel or move around. Furthermore, buying in the area of your choice may be prohibitively expensive, so renting provides you with the option of living in your ideal choice of neighbourhood, until you can afford to buy in the area or one similar. Says Haggiyannes, "According to an article published on property24.com by Neville Schaefer, CEO of national property manager, Trafalgar, the rental market is continuing to develop worldwide. This provides tenants with greater variety of choice and increasingly competitive rentals."

Haggiyannes concludes, "Ultimately, the decision to buy or rent is an extremely personal one, and one of the most important financial decisions you can make. Whichever option you decide upon, it is essential to make sure that you know, upfront, what the hidden costs are, what the benefits will be and what could possibly go wrong. If you ensure that you do your homework properly, your decision should be financially sound and ideally suited to both your pocket and your lifestyle."

Established in 1985, Auto & General Insurance is a leading provider of short-term insurance solutions, with a core focus on innovative administrative efficiency and a service-orientated approach. For more information on Auto & General, or to read the full Bill of Rights, please visit www.autogen.co.za.