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Monday Dec 11, 2017

If you pay more than 30% of your income to rent, you are overdoing it

South Africa tenants are urged not to spend too much on rent every month in attempts to keep up with their peers or demand "the best".

This is according to Michael Bauer, managing director of SAProperty.com.

Bauer says although most tenants countrywide pay about 30% of their monthly income towards rent, it has been found that those who rent in the higher brackets are paying more than what is deemed to be an acceptable ratio.

"It seems tenants who rent more expensive properties have a tendency to want the best and will pay more of the acceptable budgetary amount than they should. Figures indicate those in the R15 000 and above monthly rental category are paying 35.5% of their monthly incomes on rent alone. Those spending between R10 000 and R15 000 are not far behind, with 34% of their monthly incomes going to rent."

While those in the rental brackets above these figures might have more disposable income due to lower debt to income ratios or earn higher salaries, Bauer says tenants must beware of falling into the trap of spending too much of their salaries each month on something that is disproportionately high.

"Instead, they could insist on spending only 30% of their salaries on rent and put a small percentage away for a deposit on a home of their own in the future. As demand increases in many areas, so will rental amounts, and tenants should constrain the need to keep up with peers by taking on expensive leases."

Payprop's final Rental Index for 2017 shows the Western Cape's year-on-year rental growth - for Q2 and Q3 of this year - still tops the national index with rental figures having risen by a third in three years. This far outperforms the weighted average cumulative growth, which Bauer says has also seen some tenants "pushing the boundaries" of what they would pay for units in ratio to what they earn.

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