A viral thread on X, posted by Thendo Muloiwa, has reignited the age-old debate: is it smarter to buy or rent? Thendo shared a real-life example that challenges the widely held belief that owning property is the ultimate path to wealth accumulation. His calculations have left many questioning the traditional wisdom of homeownership, especially in cities like Johannesburg.
The Numbers Behind the Controversy
Thendo revealed that he had been renting a flat in Victory Park, Johannesburg, for R12,000 a month. The landlord recently listed the unit for sale at R1.4 million. Curious about the financials, Thendo crunched the numbers and shared his findings online. At the current prime interest rate, bond repayments on the property would amount to R14,479 per month. Add levies of R2,500 and municipal rates of R1,200, and the total monthly cost of ownership soars to R18,200—R6,200 more than his rent.
While that difference alone raised eyebrows, Thendo also pointed out the lackluster appreciation in property value. The flat was purchased for R1.375 million in 2018 and is now listed for R1.4 million—an increase of just R25,000 over seven years. Worse still, some similar units in the area have been on the market since 2024, with no buyers in sight. “You obviously can’t eat paper profits or an illiquid asset nobody wants to buy,” Thendo wrote.
When Renting Makes More Sense
Thendo’s analysis raises a critical question: is renting a smarter option than buying? The answer isn’t straightforward. It depends on factors like the location of the property, the purchase price, and the economic health of the surrounding city. For instance, property markets in South Africa vary significantly between cities.
In Cape Town, the property market has seen robust growth over the past decade. According to FNB’s Property Barometer, the city’s average house price growth has consistently outpaced both inflation and the national average. Certain suburbs, such as Woodstock and Observatory, have seen property values double in 10 years, creating significant wealth for homeowners.
On the other hand, Johannesburg presents a starkly different picture. Sectional title flats, like the one Thendo rented, have seen stagnant or even declining prices in real terms. After accounting for inflation, many flat owners in Johannesburg have made little to no financial gains. In some cases, even owners of luxury mansions in affluent neighborhoods have struggled to sell their homes for prices that match their purchase costs from a decade ago.
Why Location Matters
The divergence in property market performance boils down to one key factor: the functionality of the city. Property prices tend to follow people, and people gravitate toward cities that work. Cape Town, despite its flaws, boasts a relatively well-functioning municipality. The City of Cape Town consistently leads national rankings for service delivery and has achieved consecutive clean audits. Basic services like water, road maintenance, and city planning, while not perfect, are relatively reliable.
In contrast, Johannesburg has faced numerous challenges, including slow service delivery, infrastructure issues, and governance problems. These factors discourage businesses and residents alike, leading to sluggish property markets in many areas of the city.
The Final Word
So, should you buy or rent? The answer isn’t universal. If you’re looking to invest in property, the decision should hinge on the economic prospects of the city and the specific neighborhood you’re considering. Cape Town’s property market has proven to be a wealth generator for many, while Johannesburg’s story has been more mixed. Ultimately, the choice between renting and buying depends on your financial situation, lifestyle needs, and the long-term prospects of the property’s location.