Jackie Cameron
22 August 2008

Are you overlooking the most important reason for home-ownership?

Amid the slew of house price data and analysis available these days it is easy to get caught up in the details of the numbers - and forget the main reason we should buy property in the first place.

Ultimately it should be about having a home that is yours to decorate and live in as you decide and, more importantly, that no-one can take away from you. It should not be encumbered with debt, so you can eliminate what is usually the biggest living expense.

And, at the very least, you should own your home by the time you retire. This is because your income is likely to decline quite rapidly from that point while general expenses will rise in line with inflation.

That's assuming, of course, you would prefer not to rely on kindness from family members and strangers in your twilight years.

I was reminded of this important reason to buy property again this week when Lenie Visagé, of Realnet Realty in Pretoria, dropped Realestateweb.co.za a line to tell us about an interesting new trend that has emerged in her area.

Retired people are handing over the keys of their homes to tenants and renting elsewhere for a lower rental. This way, they are freeing up some extra cash to take care of living expenses.

Some have gone this route of downsizing because now is a bad time to sell; others because they would like to keep their income-generating asset.

"Such owners typically have a very small or no mortgage on their homes and can achieve rentals of about R6 000 to R8 000 a month for three-bedroom family homes. Becoming landlords is a better proposition for them in a market where there is great rental demand but downward pressure on selling prices," says Visagé. (Click on this article heading Golden Oldies rent out homes, find cheaper places to rent for more.)

At least these Golden Oldies have the option to use their homes this way.

I reckon the way people have been mortgaging and remortgaging their homes in recent years, throwing cars, televisions and other items that aren't real assets into the pot, means many who think they might have this option later are in for a rude shock.

The older generation never dished out the bank's money like we do today.

They tended to buy a lot with cash, drove their cars for more years than we do and were generally more cautious with their money.

That's partly, no doubt, because credit was much harder to access for the average consumer. It's only been recently that even the lowest income earners have been able to stock up on credit cards; not so long ago those pieces of plastic were the show-off items for higher income earners.

If ever you are looking for an incentive to live well within your means and save like crazy, find out how much money you will need to produce an income similar to the one you currently receive (for example at http://www.absa.co.za/).

You will quickly come to the realization that you need to have a nest egg of many millions of Rands in today's money if you have any hope of enjoying even smaller luxuries when you have stopped working.

Even if you have been contributing to a company pension, or are saving much of your earnings, your shortfall between what you would like to receive and what you will receive will probably be vast.

The only way you are likely to cope with this later is to radically cut down on your expenses - your monthly mortgage repayments representing a sizeable portion.

These days, most home-owners know that if you pay a little extra into your home loan each month you will wipe out this debt more quickly, and pay far less in the long run in interest, than the initial paperwork you sign suggests.

And, after you have repaid this debt, you free up income to save and invest - in another property or in another asset class. (Click here to access Realestateweb's easy home loan calculators).

Yet, so many people don't do this.

Others, meanwhile, suggest it will always be better to rent because it will be cheaper and your money is better off in equities. That's great for the financially sophisticated, but for the vast majority - who do not have their finger on the investment pulse - avoiding home-ownership is a highly risky strategy.

Owning at least one property shouldn't be a "nice-to-have" on your list of priorities. One day, owning your home could save your proverbial bacon.