How to know whether to buy or rent

A thread on X went viral this week. A guy named Thendo Muloiwa shared that he had spent two years renting a flat in Victory Park, Johannesburg, for R12 000 a month.  His landlord had listed the unit for sale at R1.4 million. 

Thendo did the math (out loud, for all of X to see). What he found was uncomfortable reading for anyone who has been told that buying property is the golden path to wealth.

His numbers were blunt when he typed that bond repayments at prime would run at R14 479 a month. Add levies of R2 500 and rates of R1 200 and the total cost of owning the flat comes to R18 200 a month. 

Compare that to the R12 000 he was paying to rent the space and suddenly the “Why rent when you can own?” crowd goes silent. 

To make matters worse, the previous owner paid R1.375m for the unit in 2018. Seven years later, it’s listed at R1.4m — an appreciation of R25 000. That’s not a typo: R25 000 in seven years on an asset you were paying bond interest on.

Then Thendo hit the real eina button: some of the units had been sitting on the market since 2024, with no buyers. You obviously can’t eat paper profits or an illiquid asset nobody wants to buy.

Is renting smarter than buying? Not exactly. 

Here’s the most honest way I can answer: it depends on where you buy, what you pay and what the city around your asset looks like. Let me put it to you another way. The same property in different cities in South Africa will give you different outcomes. 

Cape Town’s property market has appreciated aggressively over the past decade. 

According to FNB’s Property Barometer, the city’s average house price growth has consistently outpaced inflation and the national average. In some suburbs, property values have doubled over the past 10 years. People who bought in Woodstock or Observatory in 2014 are sitting on real wealth today.

Johannesburg? That’s a different story. Particularly in sectional title flats, like the type Thendo was renting. Prices in many areas have gone sideways or backwards in real terms. 

After inflation, a lot of Joburg flat owners haven’t gained anything. 

The same could be said in the upper end of the luxury market as many with mansions in good areas of Johannesburg can’t sell their homes for the prices they paid for them 10 years ago. Some have lost money on paper, even before you count the interest they paid on the bond. 

Why? 

Because property prices follow people. And people follow functioning cities.

Cape Town, whatever its flaws, has a relatively functional municipality. The City of Cape Town consistently tops national rankings for service delivery and has received clean audits (one of the few municipalities to achieve consecutive clean audits each year). Water comes out of taps, roads get fixed and city planning, while imperfect, has some coherence.

When a city works, businesses want to be there. When businesses want to be there, skilled workers follow. When skilled workers follow, demand for housing goes up. When demand for housing goes up, prices go up. It is not complicated; it is cause and effect.

The City of Johannesburg, by contrast, has been plagued for years by mismanagement, ageing infrastructure and service delivery failures. 

Hillbrow, once one of the most sought-after addresses in Africa, is now a cautionary tale about what happens when a municipality stops caring about its built environment. 

Even in suburbs like Victory Park, a decent, middle-class area, you see the knock-on effect of a struggling metro. 

Investors are cautious and so are the buyers. The money is instead flowing to where things work or other areas that offer better security for the investment. This is why I always say: when you are purchasing a real estate asset, you are not just buying a property. You are buying into a municipality and how they deliver services and maintain infrastructure that affects your asset. 

Your property’s value is influenced by everything surrounding it. You could own the most beautifully renovated house on the street but if the house next door has been hijacked, the building across the road is derelict and the park on the corner is a crime hotspot, you are going to struggle to sell and achieve a good price. 

This is why a mansion in a well-maintained estate in Stellenbosch and a mansion in a neglected Johannesburg suburb are two different investments, even if the buildings are identical. 

The surrounding environment is almost as important as the asset. Infrastructure, green spaces, road quality, street lighting, cleanliness and neighbourhood safety all feed into what a buyer is willing to pay when you eventually want to exit.

Before you buy anywhere, walk the streets. Not just the block your property is on — the surrounding area within a kilometre. Look at the state of the roads and the buildings. Look at what businesses are operating there. Are there new restaurants opening or are shuttered shopfronts piling up? These are your indicators.

Even in a great city and a great suburb, you can destroy your investment by overpaying. This is probably the most underrated truth in property. The price you pay is the single biggest determinant of your return. 

If you paid R1.375m for a flat in 2018 and it’s worth R1.4m in 2025, you have not made money. You have lost money. Inflation over that period has been roughly 30%. 

Your money sitting in a decent money market account would have grown significantly. The bond interest you paid has compounded year after year against you.

Smart buyers look for motivated sellers, distressed sales and properties that have been on the market for too long. A property that has been sitting unsold for 12 months is a negotiation opportunity. A buyer with a clean pre-approved bond in a slow market has enormous leverage. 

In Johannesburg’s flat market, I’ve seen buyers negotiate 15% to 20% off the asking price. The discount is day-one equity, real money you didn’t have to earn. 

There’s also a concept called buying below replacement value — paying less for a property than it would cost to build it from scratch. 

When you find those deals, the fundamentals are in your favour from the moment you sign.

Should you buy or rent? 

If you’re looking at a well-located property in a functioning city, the body corporate is healthy, the surrounding infrastructure is intact and you can negotiate a genuinely good price, buying can build wealth over time. 

Property is one of the most accessible asset classes for South Africans. It gives you a leveraged position, meaning you can control a R1.5m asset with a much smaller initial outlay and if you hold it long enough in the right location, real capital appreciation follows.

But if you’re buying a sectional title flat in a Johannesburg metro that has been struggling for years, paying full asking price, taking on a bond whose monthly repayment is substantially higher than the rental on the same property, in a building whose levies are stretched, you are not building wealth. You are carrying an expensive liability and calling it an investment.

Renting in that scenario is not a failure; it is patience with a purpose. The money you save on the difference between renting and owning can be invested in equities, ETFs or a deposit fund for when you find the right property at the right price in the right place. 

Run the numbers and run them all. Not just the bond calculator on the bank’s website. Because the real estate industry has an obvious interest in getting you to buy. 

The banks, the estate agents and the attorneys all make money when you sign. You’re the only one at that table whose interests are entirely your own. Do the maths and buy smart — or not at all.

المصدر: Mail & Guardian (ZA)