Rent with an option to buy property
There are several good reasons to pay a deposit when you buy a home - among them the fact that you will have a smaller bond repayment to make each month and that you will save a mint in interest over the life of your home loan.
However, with property prices and interest rates at their current lows, many buyers who feel they can comfortably afford a monthly loan instalment really don’t want to wait until they have saved up a deposit before getting into the market.
So what should they do, especially when most banks are still very sticky about granting 100 percent bonds?
“Well, one answer is to rent a home now from an owner who is prepared to give you an option to buy it later at a pre-agreed price,” says Berry Everitt, MD of the Chas Everitt International property group.
This is not so unlikely as it sounds, he says, as many homeowners are only renting out their properties at the moment because they have not been able to sell.
Buyers cashing in on luxury homes
Property buyers in South Africa are reportedly bargain hunting in some of the country’s luxury golf estates thanks to low maintenance and security.
According to Lew Geffen, chairman of Sotheby’s International Realty in South Africa, affordability is one of the main drivers fuelling the popularity of upmarket golf and lifestyle estates as well as other gated complexes.
Geffen says property buyers in search of luxury homes are currently flocking to estates in the realisation that home prices are in many cases still below 2008 levels and often well below those for comparable properties in the older, blue-chip suburbs.
At the Silver Lakes Estate near Pretoria, homes are now selling for less than R3 million and buyers are reportedly looking to cash in on these bargains in top estate around the country, says Geffen.
However, says Jan Davel, managing director of the RealNet estate agency group, buyers do need to be aware that almost all duets are in fact sectional title units, even if they are freestanding homes, each set in their “own” garden.
“This is important because it means that the buyer will in fact be taking transfer only of the interior of his or her duet home, together with an undivided share of the common property.
As is the case in other “genuine” sectional title schemes, duet owners can register exclusive use areas such as a walled-in garden or an extra parking bay.
The remainder of the grounds, access paths or roads, shared facilities such as a pool, tennis court, security gates, electric fencing and the roofs and exteriors of the residential units form the common property for which owners in the scheme are, strictly speaking, jointly responsible.
Building activity expected to improve
The South African value of recorded building plans passed (at current prices) was 4.8 percent higher (R3 035.7 million) in 2011 compared with 2010.
According to Statistics South Africa (Stats SA), there were increases for non-residential buildings (20.2 percent or R2 693.6 million) and residential buildings (8.4 percent or R2 241.5 million) and a decrease for additions and alterations (-8.1 percent or -R1 899.4 million).
Five provinces reported year-on-year (y/y) increases in the value of building plans passed during 2011.
The increase in the value of building plans passed was dominated by Mpumalanga (contributing 1.9 percentage points or R1 206.4 million), KwaZulu-Natal (contributing 1.9 percentage points or R1 181.7 million) and Western Cape (contributing 1.4 percentage points or R869.0 million).
Stats SA says the biggest decrease was reported in Gauteng (contributing -1.3 percentage points or -R805.5 million), followed by Free State (contributing -0.6 of a percentage point or -R374.4 million).
Cash deposit key in home buying
Nearly two thirds of South Africans polled will base their property purchasing decision in 2012 on whether they are able to afford a deposit.
According to a survey by ooba, 58.83 percent of respondents considered having a deposit for a home the biggest influence on their property purchasing decision in 2012.
Low interest rates were rated as the second biggest deciding factor at 17.09 percent closely followed by stagnant and declining property prices at 13.68 percent.
Craig Deats, executive director for sales and distribution at ooba says not having a deposit available in order to apply for a home loan is a common concern among first time home buyers.
He explains that in the current economic environment, many consumers find it difficult to save towards a home loan deposit.
Water meters for sectional title units
Water costs, in most cases, are a Body Corporate’s single largest expense. This is mainly due to bulk water meter systems being installed in most developments pre 2004.
“In many cases we find that tenants and owners in sectional title schemes are not too concerned with water usage as this has always been an expense carried by the Body Corporate,” says Johann le Roux, Executive Director of Propell.
“They are not too concerned with leaking toilets, geysers or taps as the perception is that this amount will be covered by the Body Corporate and therefore included in their levy amounts.”
In many sectional title schemes overcrowding of units has become an issue and due to the bulk water meter systems, the smaller households end up “sponsoring” the overcrowded units.
Notwithstanding the environmental impact of water wastage that will catch up with society soon enough, there is a fear that water tariffs will go the same way as electricity costs in the very near future.
Tell the truth and you will get a loan
When applying for home loans, it is important that would-be homebuyers give banks truthful information about their current financial situation.
If it happens that an applicant fails to get the full bond amount for which they had applied, the applicant can then make a separate deal with the seller to cover the outstanding bond amount, says Lynette Ferndale, conveyancer with Gunstons Attorneys.
She is a firm believer that would-be home buyers should be completely open and transparent with the banks when applying for home loan finance.
Ferndale explains that should the home loan applicant fail to get the full bond amount they had applied for, they can make a deal with the property seller in order to secure the home.
However, she says the second deal might lead to the bank reducing the loan amount or alternatively, in severe cases, cancelling the bond because they now see the applicant as over-extending their debt and exceeding affordability limits.