Co-buying, a practice where two or more individuals join forces to purchase property collaboratively, is gaining rapid popularity among South African homebuyers. Rhys Dyer, CEO of ooba Home Loans, highlights that while co-buying traditionally involved couples, the trend has expanded to include friends, business partners, and relatives.

This phenomenon, which has recently re-emerged in the United States, was spotlighted by the New York Times, featuring stories of friends becoming co-buyers and acquiring 22 homes across the country with the mantra “houses before spouses.”

Dyer emphasizes that co-buying transforms homeownership from an aspirational dream into an achievable reality. Particularly appealing to young homebuyers facing challenges such as higher interest rates and a rising cost of living, co-buying allows applicants to combine financial resources, enabling them to secure a property that might otherwise be financially out of reach.

The financial advantages of co-buying extend beyond the initial purchase price. Co-buyers can contribute a more substantial deposit, divide upfront transfer costs, and share future responsibilities such as property taxes and maintenance costs. Additionally, joint applications for home loans enhance approval odds as they reduce the risk of repayment defaults for the bank.

While the majority of home loan applications received by ooba Home Loans still come from single buyers (61.1%), joint applications are on the rise, with 75.3% involving spouses and 24.7% involving other parties, including siblings, parents, friends, life partners, or business associates.

The ‘Bank of Mum and Dad’ is playing a crucial role in this trend, as parents increasingly co-buy with their young adult children to help them overcome affordability challenges. Dyer emphasizes that despite perceptions of favoritism, such arrangements are often driven by a desire to create generational wealth, especially when properties are intended for rental income.

The soaring property prices in major cities like Cape Town, with a 141% increase since 2010 according to StatsSA, are prompting co-buying as a strategic move to tap into lucrative buy-to-let opportunities. The buy-to-let market in the Western Cape reached a record high in September 2023, constituting 30.8% of ooba Home Loans’ applications in the region.

Dyer explains that the joint home loan application process is similar to an individual application, with the bank considering the incomes and credit records of all co-buyers. Ownership percentages are assigned based on the number of applicants, with adjustments required if co-buyers withdraw from the agreement.

Despite the financial benefits, Dyer advises co-buyers to adhere to golden rules to navigate potential complexities. Key guidelines include establishing a shared vision for the property, having a well-defined exit strategy, understanding legal implications, and ensuring realistic affordability. Dyer suggests leveraging tools like ooba Home Loans’ free Bond Indicator for prequalification to minimize the risk of loan repayment defaults.

As co-buying continues to redefine the landscape of homeownership, it offers a pragmatic solution for individuals to overcome financial barriers and achieve their homeownership dreams in the South African real estate market.