Questions to ask when buying property
Property remains a viable asset class in which to invest and still forms one of the most important investment cornerstones for South Africans.
This is according to Adrian Goslett, CEO of RE/MAX of Southern Africa, who adds that for those who are currently looking at investing in a property, the timing couldn’t be better.
Goslett says that since buyers market conditions prevail, those who do their homework thoroughly and follow sound investment advice are sure to reap solid returns in the long run.
“There is no doubt that South Africans are spoilt for choice when it comes to property investment options. From bachelor flats and apartments to game farms and small holdings and everything in between, buyers have a range of property types from which to choose,” he says.
However, Goslett says that location remains the most important factor when purchasing a property – no matter what type of property it is – and so buyers need to select the area in which they invest carefully. “Buyers also need to take the time to investigate the relevant properties on offer in their area of choice and compare the costs per square metre, the fittings and finishes etc,” he says.
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Sectional title disputes, arbitrators playing fair?
The essence of arbitration has been eroded, and expectations of a quicker, cheaper forum to resolve the many types of disputes within sectional title complexes lacks credibility. Marina Constas, a specialist sectional title attorney and a director at BBMAttorneys, lays the blame for this at the feet of arbitrators themselves.
“I am, and always will be, a proponent of arbitration as opposed to a court hearing. A properly run arbitration headed up by a robust arbitrator trumps the Magistrates’ Court or High Court process. In terms of the Standard Rules of Arbitration, the arbitrator has the discretion to hold the hearing informally and to dispense with certain rules of court. But many arbitrators have lost their way and become too focused on the financial side of the arbitration, charging exorbitantly high fees and often treating the process like High Court litigation.”
She pointed out that, in sectional title complexes where people lived in close proximity, problems were inevitable. Arbitrations could arise over noise, failure to maintain exclusive use areas, an owner unlawfully extending his section, trustees’ failure to maintain a building, the keeping of pets or even the removal of satellite dishes or illegal structures. Many revolved around the enforcement of conduct rules and the collection of arrear levies.
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Deposits still key for homeloans
Although 100 percent home loans are being approved by banks in select cases, potential property owners are advised to save for mortgage deposits.
This is according to Kevin Mountjoy, national sales manager at ooba, South Africa’s leading bond originator, who says that on average 36.5 percent of applications for 100 percent bonds were granted by the banks during March 2011.
“This is in comparison to the 48.33 percent of bonds that were granted with a 10 percent to 20 percent deposit during the same period”.
Mountjoy says that deposits offer both long and short-term benefits for potential home buyers.
Although the current property cycle is seen as a buyer’s market with good investment opportunities for potential home owners, the economic climate has caused financial institutions to be risk averse with stringent credit criteria and lending policies.
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Don’t stop paying bond until transfer
Most homeowners know by now that when they list their property for sale, they also need to give their bank at least three months’ notice of their intention to cancel their home loan so they can avoid having to pay a penalty.
What many don’t appreciate, however, is that they need to keep making their monthly bond repayments during the period that it takes to transfer the property after it is sold.
“It is true that the bank will usually make provision for three month’s worth of payments in the cancellation figure it provides to the transfer attorneys,” says Rudi Botha, CEO of leading mortgage originator Betterbond, “because that is the average time it takes for a property to be transferred from one owner to another.
“But it is a mistake to stop making bond repayments as soon as the sale agreement has been signed. For one thing, it could easily damage your credit record and seriously hinder your chances of obtaining another home loan, or of being able to negotiate a lower interest rate.”
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Wealthy favour property investments
High Net Worth Individuals globally still place property at the top of their investments lists, on average 35 percent of their assets.
According to the Knight Frank Wealth Report 2011, property remains close to HNWI with property accounting for 35 percent of their investment portfolios.
The report suggests that the only thing these wealthy individuals would rather put their money into besides property is their own businesses.
In South Africa, HNWI at the moment are holding back from investing in almost all kinds of assets including property, said Lanice Steward, managing director of Knight Frank’s South African associate, Anne Porter Properties.
“The favoured channels for investment are gold, commodities (especially coal, steel and platinum),” said Steward.
She said there is a trend among shrewd investors to build up their portfolios by buying repossessed properties. These properties often sell at 30 percent to 40 percent below their previous values hence the boom in the auction property market.
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Property rates bill debate continues
Deputy Minister for the Department of Cooperative Governance and Traditional Affairs Yunus Carrim said last week the proposed bill still needs to be revisited and aggressively discussed before any decision is taken.
“Although comments closed on 22 July, the public and stakeholders can still send their comments once the proposed bill is in Parliament,” said Carrim.
Speaking on SA FM with Property24’s Mari van Wyk, Carrim said it is not the intention of government to subject people owning more than one property to paying commercial property rates.
In fact, he said, if anything, the proposed bill seeks to protect rate payers.
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Help my flat has been hijacked!
A Property24 reader asks:
I have a flat in Yeoville which has been hijacked. I could detail the situation further, suffice to say the entire building has been taken over and my attempts to sell the flat have ended with death threats to the prospective buyer resulting in a cancelled sale, and even myself when I went to visit my flat.
What remedy is there where an entire building has been taken over, where there is no body corporate, where the building is in arrears with council, and council has ‘made” arrangements with the illegal occupiers to pay for basic services.
Sewer runs out the front of the street, and the building is in a state of disrepair.
What to do? I can’t even give the place away?
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Sell or hold your investment property?
While the effects of the recession have influenced investors, particularly in the buy-to-let segment of the property market, owning a property is still a sound investment that will pay dividends over the long term.
Should you decide to sell your investment property, be sure to follow the proper process of consulting your tenant.
So says Adrian Goslett, CEO of RE/MAX of Southern Africa, and adds that while the buy-to-let market has remained weak due to the current economic climate, the rental market has remained strong as many consumers are battling with high debt-to-disposable-income ratios and therefore are unable to save up for a deposit or secure mortgage finance.
It is expected that these market conditions will underpin the recovery in the buy-to-let market in the future. In the mean time, he says investors are taking stock of what they have and what they can afford and where they stand with their current investments.
Forthose who have decided to sell their buy-to-let property for whatever reason, Goslett warns that there are a number of considerations that need to be taken into account, especially if there is a lease agreement in place and a tenant occupying the property that the investor plans to sell. This is because legally, the lease agreement takes precedence over a sale agreement.
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