As your salary changes over time, your expenses will change. But what if you’re spending an exceedingly large percentage of your income on accommodation? Is it feasible or even recommended in our current financial climate?
We reached out to real estate experts to ascertain how much you should spend on accommodation, so that you can ensure you’re budgeting correctly each month.
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Keep housing at 30% of your income
According to Grant Smee, managing director of Only Realty and founder of EPiC South Africa, Covid-19 has certainly taught us to spend and save wisely.
“You should spend a maximum of 30% on housing each month. Why this amount? By limiting your expenditure to 30% of your net salary you’re ensuring that you have enough budget to pay for other living expenses,” says Smee.
He explains that this may include transport, food, education, and other essentials, as well as potential savings or reserves for unforeseen circumstances that may arise.
READ MORE: Can’t pay rent? This is what you should do
Should you move if your housing is too expensive?
Smee believes you should always take your personal circumstances into account when upgrading or downgrading your accommodation. Most importantly, you need to ensure you’re not allocating too much of your budget to your accommodation.
“Consider the economic climate, and take a look at your immediate surroundings – perhaps you’re paying for space or amenities, such as an off-plan development you’re not making use of but are paying a premium for,” says Smee.
According to Lorraine-Marie Dellbridge, manager at Lew Geffen Sotheby’s International Realty Rentals in Cape Town Southern Suburbs, Noordhoek, and False Bay, prices are coming down at the moment.
She points out that some tenants will consider moving to a different housing option so that they can save a couple of thousand rand each month.
“Some tenants can move within the same block. In the current economic climate, everyone wants to save where they can, and the first place they’ll look is rent because they can do something about that. Unlike the price of food or petrol, you can bring your rent down if you keep an eye out,” says Dellbridge.
She explains that different areas offer different prices for the same specifications. For instance, a two-bedroom apartment in Tokai may be R10,000 per month, whereas in Plumstead it may be R8,000 a month.
“In the current market you can negotiate with your landlord if you’ve noticed that rentals have come down in your immediate area or even block,” says Dellbridge.
Alternatives to making up housing spend
Smee says that other ways to save on housing may be to rent out unused space on your property. For example, you can rent out your garage to someone who’s looking for additional storage space, or a bedroom to someone who’ll share your living space as well as the cost of utilities.
However, he notes that you must first get permission in writing from your landlord, if you are renting.
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