Buying a home is the most efficient way for most people to start building up their personal wealth
There is a new energy and confidence in the property market in the wake of the ANC’s elective conference at the end of last year, and those who have been planning to buy a new home this year should get ready to move fast.
This is the view of Gerhard Kotzé, managing director of the RealNet estate agency group, who says it is always better to buy sooner rather than later when it comes to property – because house prices will keep going up.
“And given the current optimism about South Africa’s economic prospects, it seems they may start rising faster than the current low gross domestic product growth rate might indicate. So delaying a purchase could mean that you will need a bigger home loan to buy the same property – and a higher salary to qualify for that loan.”
Also, buying a home is the most efficient way for most people to start building up their personal wealth, and the earlier a purchase is made, the faster that will happen.
However, prospective buyers do need to be informed and financially prepared for the long-term commitment of buying a property.
“For example, they need to ensure that they will not be stretched to the financial limit just to pay their monthly bond instalment, as they would then be at risk of losing their homes should interest rates rise.
“So they should start by reviewing their monthly household budget.
“The costs of owning a home as opposed to renting include municipal rates and service charges, property insurance, and any monthly levies payable in a sectional title development, as well as the monthly bond repayment.”
Kotzé says prospective buyers must also ensure they have enough savings to cover the hidden costs of buying a home, in addition to the deposit. These costs include the bond registration fee, legal fees, transfer fees and transfer duty if the property costs more than R900 000. These costs will have to be paid in cash before the property can be transferred into the buyer’s name.
“Buyers should budget for regular maintenance of their property and any repairs that may be necessary in order to keep it in good condition and protect its value. The benefit of doing this is that it will give them some extra flexibility in the event of interest rate increases that push up their home loan instalments.”
And those who intend to apply for home loans need to make sure that their credit records are clean – and take any remedial action that may be necessary to get it that way.
“They may not have any debt judgments against them, but small forgotten bills from a few years ago could take months to fix and lengthen the buying process.”
Kotzé advises prospective buyers to get a home loan pre-qualification certificate from a reputable bond originator before they start looking at homes.
“This will give them a solid idea of their purchasing capacity, so they don’t look at homes they can’t afford. It will also help them to get an offer to purchase accepted.”