South Africans traditionally loves owning property. Residential properties have however disappointed greatly in terms of the lack of capital growth and the opportunity cost have increased greatly due to fantastic offshore investment options being available. This begs the question: “Should I consider RENTING in retirement?”. We have determined 5 reasons why you should in fact consider RENTING in retirement:
Reason 1 – Enables better portfolio diversification
Most South Africans have their assets invested or locked up in South Africa. However, these assets are exposed to economic, political, and exchange rate volatility which can result in a massive amount of concentration risk. If you sell your house and invest the proceeds offshore, you can significantly de-risk your investment portfolio through spreading assets globally.
Reason 2 – It allows for flexibility
Renting gives you the option of moving as often as you please and enable you to adapt your living arrangements to suit your changing needs as you get older. This also opens up the possibility for you to stay close to family and friends, or move into a retirement village.
Reason 3 – Well maintained facilities
Rental properties are generally better maintained to keep up with market trends and to maintain their income potential, which means you could benefit from the latest fittings and finishes without costing you extra capital expenses.
Reason 4 – Emergencies are not your problem
Any nasty maintenance surprises are not for your account and this could be a great benefit for retirees living off fixed income products where the capacity for large capital expenses is limited.
Reason 5 – Cashflow Protection
Rent is almost always cheaper than bond repayments on a comparable property. That makes it a more affordable option, especially since property capital values in South Africa have not grown over the last decade.