As the cost of living continues to rise and eat into retirement savings, senior citizens in many of South Africa’s established suburbs are unlocking some of the value in their large family homes – not by selling them, but by renting them out, and then becoming tenants themselves in smaller, easier-to-manage properties.
“This emerging trend makes good sense for older homeowners whose own families are grown and who want to scale down anyway because of security or home maintenance issues, or perhaps because they want to enhance their retirement savings,” says Harcourts Real Estate Richard Gray.
“Such owners typically have a very small mortgage or no mortgage to pay any more and can achieve substantial rentals for their three- and four-bedroom family homes in sought-after, central areas, especially in the current phase of the market where rental demand is strong and rising.”
They get to keep their real estate assets and if they’re lucky, he says, they may even have a granny flat or cottage on their property where they can stay for “free” while earning rental income on the main dwelling.
“Alternatively, they generally target rental apartments and townhouses in secure complexes, where the maintenance is taken care of and they can lock-up-and-go as they please. And the rentals they pay for these units are usually more than covered by the rentals they are receiving for their own properties, leaving them extra money to live on or to put into their savings if they are still working.”
This is just another illustration, Gray says, of how home ownership can help to create wealth and provide consumers with advantageous financial options throughout life.
“Indeed, the fact that many baby-boomers can now describe themselves as being ‘freetirees’ who are able to do what they want with their lives is largely due to the fact that they became homeowners early in life and worked hard to pay off their bonds as soon as possible.”
Meanwhile, the new trend is also advantageous for young families who are desperately keen to live in established suburbs with good schools, shops, entertainment, sport facilities and public transport all right on their doorstep – but can seldom afford to buy a family home in these areas.
“Renting in a central suburb and saving time and money on transport gives them a much better chance of saving a deposit to buy a home of their own in due course.”