Buy a home close to work, save money

With energy prices increasing faster than the consumer price index, home buyers should consider moving as close to their workplaces as possible.

Living close to your workplace will allow for a better balance between work and home as you will have more time to spend with your family.

This is the message from Professor Matthew Lester of the Rhodes School of Business, after the release of South Africa’s 2013 budget.

Lester says that South Africa is in an energy crisis, evidenced by the fact that it is paying international prices for electricity and petrol. Therefore, it is critical for consumers to start relooking at their energy usage and what it is costing them to travel, he says, adding that transport costs need to be moved to the top of home buyers’ priority lists.

With the high cost of fuel, and carbon tax coming into South Africa, the cost of which would be passed on to the consumer, people need to travel less, Lester urges. While location is still important when buying real estate, the real estate cliché now has to include proximity to work.

By living close to work, he says consumers could make a significant impact on their “prohibitively expensive living costs” to ensure they would be able to afford to maintain their homes in the long run. Properties are often affordable to buy but too expensive to keep, he adds, hence his encouragement of people rechanneling as much of the money they were currently spending on commuting as possible into paying off their bonds and the general maintenance of their homes.

Lester also urges people not to rely on the government to put a roof over their heads, saying it is already supporting the majority of the country’s 52 million citizens in terms of social grants.  Pointing out that people today may have a life expectancy of 100 years, he says many would be retired for as long as they had worked.

Lester says the time of the six parent family has arrived and asks whether we afford to all live in different homes. To this end, he suggests that there has never been a better time to make “structural” changes. This is particularly relevant to families who are able to live comfortably on the same property – what he refers to as ‘bunking up’. This is a huge opportunity to save a fortune, he says. “Paying your bond is one thing, maintenance and upkeep quite another, so if you’re going to move, make the move now and don’t follow the market.”

While a relatively alien concept for those who are used to long and congested commutes, and who place a high value on location and late model cars, the concept of living close to work is gaining momentum in other countries, says Richard Gray, CEO of Harcourts Real Estate. 

By buying a house closer to work, you spend less time in traffic, you save money on petrol and wear and tear.

Gray says the issue of living close to work was thrust into the spotlight by, among others, the Chicago-based Center for Neighborhood Technology (CNT) and Johns Hopkins University in Maryland, USA. The CNT uses a Housing and Transportation Affordability Index to measure the true affordability of housing based on where it is located. The ideal according to this index is that housing and transport costs, the two largest expenses in most homes in the US, should account for no more than 45 percent of their budget, and he says this is likely to apply to South Africa, too.

The “Live Near Your Work” initiative of the Johns Hopkins University further underpins the shift in home buyers’ minds, he maintains. “The programme has been designed to help employees reduce their travelling costs and times while simultaneously building equity in their homes." Michelle Carlstrom, senior director of the University’s Office of Work, Life and Engagement, who oversees the programme, relocated and therefore reduced her daily commute from almost 90 minutes to just four minutes. This is a huge save in petrol, time and wear and tear.

Gray says home buyers need to buy what they can comfortably afford, in terms of initial purchase price and in home and vehicle upkeep. When working out a budget for a new home, he says it makes financial sense to factor in travel expenses such as petrol, vehicle payments, maintenance and insurance to ensure that you can cope with inevitable fuel and electricity increases.

Something else for house hunters to consider, he adds, is quality of life. He says that living close to your workplace will allow for a better balance between work and home as you’ll have more time to spend with your family or friends and more time to pursue hobbies or upgrade your skills.