Property 24/10 - 26

Property finance: NCA not only problem
The National Credit Act (NCA) has put a dampener on property buying and selling, but it is only one part of the bigger property financing problem.

So says John Loos, property economist at FNB, who adds that he is doubtful that the NCA is the major brake on the housing market at present.

"I think that a lot of banks' tight credit criteria has to do with the very risky period that we live in currently, and not merely because of a law that requires it. The reality is that there has been a lot of bad debt around which has hurt the home lending sector, the household sector's financial condition following the recession is not healthy, and the world currently faces the risk of a double-dip recession, which would have a big impact on the household sector's financial situation again were it to materialise.

"NCA or no NCA, the current economic times arguably make conservative lending policies suitable, and I doubt that much would change right now were the NCA to be instantly dropped. It isn't as if the household sector has low levels of debt. To the contrary, the levels of indebtedness are generally high by historic standards."

Negotiate for better home loan rate
Home loans are currently hard to come by - but that should not prevent qualified borrowers from negotiating for a better interest rate.

Negotiating a loan at even one percentage point less than the prime lending rate can save borrowers a substantial sum over the life of the bond, advises Martin Schultheiss, CEO of the Harcourts Africa property group.

"In the current economic climate, however, many borrowers - and especially first-time buyers - are just so grateful to qualify for a home loan that they don't want to rock the boat."

Qualified borrowers should keep in mind, he says, that the reason home loans are hard to come by is that many prospective borrowers don't make the cut in terms of the stricter lending criteria stipulated in the National Credit Act (NCA). "Banks therefore have to turn applicants with risky credit histories down to protect their own interests.

Old or new home: What are the costs?
Whether you buy a new home or an old one, you will have to factor in certain extra costs - and it is surprising how often these are radically underestimated.

So says Lanice Steward, MD of Anne Porter Knight Frank (APKF), who adds that buyers are often reluctant to recognise that this initial expenditure will be necessary, especially as the financial benefit will not be apparent until many years later when they come to sell the home or when a new garden has matured.

Cash buying: Why and how
Two characteristics of the current property market - the difficulty in obtaining finance and the challenges of selling a property quickly - means that cash is still king when it comes to property sales.

"Even though interest rates have reached record lows and asking prices on properties for sale have returned to more market related levels, only around half of current bond applications are approved by the banks. The stringent lending criteria of the banks, including steep deposit requirements, as well as affordability assessments in terms of the National Credit Act, continues to make it difficult for buyers to obtain home loans to finance property sales," explains Adrian Goslett, CEO of RE/MAX of Southern Africa.

"Property sales are also slower compared to the robust sales activity in previous years, in part due to the bank's tight credit criteria. The latest FNB Property Barometer indicated that the average property remains in the market for 12 weeks before being sold.

What is the price of a garage?
A garage sale just got a whole new meaning.

A 14sqm garage in Victoria Road in Cape Town's Whitecliffs has come on to the market at an asking price of R2m!

"The complex has one level of remote accessible parking below. The flats are each allocated one or two parking bays but often the owners of these flats do not occupy their units and therefore do not use their bays. Thus, they choose to sell them rather than leave them standing empty," says Greeff Properties' Camps Bay director, Marion Taylor.

Eskom solar water heating rebate
Eskom are doubling our electricity prices over the course of three years and this is going to have a terrible effect on both households as well as businesses. The good news, however, is that the government has introduced the Eskom Solar Water Heating Rebate system which looks to motivate people to go green and make use of this great technology. What is the rebate all about though, how does it work and how does it benefit you? Let's take a look...

What is the rebate all about?
The Eskom Solar water heating rebate system is a government driven initiative. Similar initiatives have long been in place in countries such as the U.S. and Germany and it is only appropriate that a country with the abundance of sunlight such as we receive in South Africa also joins in on the green initiative. The idea is to allow people who are looking to go green and save money on their electricity bills to be able to afford the installation of solar water heating systems, by receiving a cash-back rebate from Eskom for a percentage of the total installation cost. This way, the initial strain of investing in an eco-friendly and cost saving technology takes slightly less strain on participants' finances.

The case for a buyer's agent
It's just as well that some estate agents in South Africa are not subjected to the rigours of the Advertising Standards Authority (ASA), as some of the claims they make in their property advertisements are complete nonsense.

The point I'm making is that there are lots of advertisements that bend the facts, that "emphasise the positive" and "underplay the negative" aspects of a property.

The net result of this is that potential buyers very quickly stop believing what the estate agents advertise and from the moment they enter a showhouse, they're determined not to be taken for a ride because they are suspicious about the estate agent's motives.

And that's my point: if there was a lot more honesty in advertising then buyers might have a lot more confidence in the agent they're dealing with.

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