A high inflation, low credit environment may not seem like the ideal one in which to begin building wealth, but that is exactly what people who buy their first homes will now be doing.

"While there are cycles in the market, the value of homes tends to double every 10 years," says Dr Willie Marais, national president of the Institute of Estate Agents of South Africa (IEASA).

"The sooner you buy, the sooner you start to tap into this growth – and now is a good time to get into the market because there is a lot of stock to choose from and prices are highly negotiable.

"On the other hand, the number of South Africans keen and financially able to buy their own homes is growing steadily thanks to broad-based black economic empowerment (BBBEE), so there will be continued demand to sustain the value growth that builds wealth over the next few years."

And paying off your own home instead of paying rent enables you to gain access to that wealth, Marais explains, in the form of a profit when you sell the property, or an equity loan that you can use to make improvements, pay for an education or perhaps buy another property.

Alternatively, you can think of building equity in your home by paying off a mortgage as a ready-made savings plan, which you can accelerate by paying more than the minimum instalment each month and which allows you to take up to R1,5m in profit on sale without owing any capital gains tax, provided the property is your primary residence.

"When you own your own home you also have a measure of freedom that you do not enjoy with a rented property. You can decorate any way you want, add on to the property if you wish and benefit from your investment as long as you remain the owner," says Marais.

"And finally, living in a neighbourhood for several years as a homeowner gives you a chance to participate in community activities, enables you and your family to establish lasting friendships and offers your children the benefit of educational continuity."

www.property24.co.za

13/07/2008