If you want to buy property, or you are keen to leave your parents’ home, make sure you can afford the move
Many South Africans stepped into 2019 with clear property goals to meet during the 12-month period.
Some have vowed this is the year they buy their first property, while others are ready to move out of their parents’ home and rent their own place.
There are also those who, whether renting or buying, will be looking for new properties to call home over the next 12 months. The country’s economy is weak, and, politically, the future lacks clarity, but for many people, South Africa remains “home” regardless, so property will always be changing hands.
However, numbers will dip during such times. The number of new residential mortgages began declining in the third quarter of 2018 (July to September) following a 7% increase in the preceding three-month period, says FNB property economist John Loos.
“The key SARB Leading Business Cycle Indicator, and weaker economic growth in 2018 compared to 2017, suggested we had been due for slower growth in new mortgage lending last year, and ultimately this became the case as the year progressed.”
However, this year there may be some improvement. “But any year-on-year growth strengthening is expected to be mild, constrained by expectation
of only limited real economic growth improvement. And, of course, we go into 2019 having just had the first interest rate hike in the current cycle late in November last year,” Loos says.
Despite this decline, the Re/Max National Housing for the final quarter of 2018 (October to December) shows more than 42 000 bond registrations were recorded at the Deeds Office.
These registrations are valued at R45.86 billion, which is a 5.4% increase in the amount of bonds registered in the previous quarter, says regional director and chief executive of Re/Max of Southern Africa, Adrian Goslett.
Re/Max’s report also shows:
29.5% of homes sold were less than R400 000.
25.6% were priced from R400 000 to R800 000.
24.9% were valued at R800 000 to R1.5 million.
15% were priced from R1.5m to R3m.
¡¡5% cost more than R3m.
These figures are further proof that, even in tough and uncertain times, property transactions continue, and new buyers still enter the market. Furthermore, Goslett believes the current market presents the “perfect opportunity for investors who might be able to get in before the market swings back in favour of the seller”.
Jonathan Davies, director of Tyson Properties, agrees: “This is probably a great time to buy property. Over the past few years we have seen the market contract considerably and property is now more realistically priced. Purchasing a home in this market places a buyer in a better position to make long-term growth gains.”
That said, there are still many considerations before taking this big plunge. Similarly, those who are itching to move out of their parents’ houses should weigh up the pros and cons, agents say.
No matter how strong the urge is to make a home move, or the desire to finally own a piece of real estate, these transactions are costly, and not easily remedied if a wrong decision is made.
Research the market before you buy
Over the past few months, aspiring property buyers have been advised “now is the best time to buy”, but while market conditions are in their favour, such a move should not be done in haste.
“My advice is not to rush out and buy the first home you see, but to rather spend some time researching the market before taking the plunge,” says Tyson Properties’ Jonathan Davies.
“Right now there are many homes on the market and buyers can afford to take their time before committing. As with all good property decisions, do your research.”
He says buyers should also view as many properties as possible to establish comparative value.
“I have seen many buyers purchase homes only to be disappointed when they realise they may have overpaid. Doing your price research will stand you in a better position to make the right decision. Consider area too. Look at areas that remain popular and have seen recent growth in values. You want to purchase in suburbs that offer good future development and growth.”
While buying property need not be overly complicated or stressful, it is not as simple as just saving for a deposit and choosing your dream house, says Jill Lloyd, southern suburbs agent for Lew Geffen Sotheby’s International Realty. For investors, particularly, the dream “can become a nightmare if they do not have their ducks in a row and a thorough understanding of the process”.
Obtaining bond pre-approval is recommended as this not only provides prospective buyers with the peace of mind that their credit record is in good standing, but also gives them a clear indication of how much they can afford to spend and the type of bond deal they can expect.
“It gets the application process started, which means the transaction can be more swiftly concluded once buyers have found the home they want.”
Lloyd says first-time buyers should also be aware of the costs over and above the price of the property.
“Some are upfront, out-of-pocket costs that are non-refundable even if the deal does not go through. Other costs will only hit your pocket once the sale is concluded, and it is essential these are all factored into your budget.”
For aspiring buyers who are still renting, Pam Golding Properties area principals for Durban Coastal, Carol Reynolds and Gareth Bailey, say they should do their best to enter the market as quickly as possible, bearing in mind affordability.
This decision is a forced saving as most people won’t save the difference between a cheaper rent and a bond so, at the very least, a property purchased using a bond is compulsory saving over time.
Reynolds says: “Ideally, look to buy the ‘worst’ house in the best possible area, while keeping within your budget. For example, I would recommend a smaller apartment in a slightly better area than a spacious apartment in a less desirable area.”
Extra fees when buying
First-time buyers need to be aware of additional upfront costs associated with buying a property, warns Lew Geffen Sotheby’s International Realty’s Jill Lloyd.
Among these are:
◆The attorney’s fee to get your bond registered on behalf of the bank.
◆The fee charged by the Deeds Office for the legal registration of your bond.
◆The fee for the service the transferring attorneys provide to get your new home transferred from its old owner and registered into your name.
◆The Deeds Office fee for the legal registration of the transfer of the property into the purchaser’s name.
◆Transfer duty is a government tax levied for the transfer of the property from the seller’s name into the buyer’s.
◆The bank’s fee for the processing of the home loan application
Get a good deal on your bond
Repeat buyers who purchase this year should not skip the process of shopping around for the best possible deal on a new home loan should they require one, says Re/Max’s Adrian Goslett.
“Last year, the Monetary Policy Committee predicted interest rate increases to be in the cards for 2019, so securing the lowest possible interest rate on your home loan upfront will prove helpful when interest rates climb.”
Goslett also suggests buyers and renters work through a trusted real estate professional to make sure they receive reliable advice.
“Real estate agents are not just professional house hunters. They also advise and guide you through the entire process. Working through a reliable professional will help you find your perfect home at the best possible price and in the shortest amount of time, something every purchaser will benefit from.”