The future of South Africa’s housing market is looking bright, as aspirant buyers between the ages of 18 and 24 years are the most optimistic about the merits of investing in property.
According to the findings of the recently released Absa Homeowner Sentiment Index, this age group has the highest positive sentiment towards property investment in current market conditions. The feeling is overwhelmingly positive across other age groups too, and overall, 78% of respondents agreed that now is an appropriate time to invest in property.
“This positive sentiment is being driven by the current lending environment, and the historic-low prime lending rate of 7%. The uptick of bond application activity experienced last year shows no sign of abating. In fact, BetterBond received a record volume of applications in December, which is usually a quieter buying period,” says Carl Coetzee, CEO of BetterBond. “What has also been encouraging is the increased number of first-home buyers; many of whom will go on to become property investors as they expand their asset portfolio over time.”
BetterBond turned to social media to find out from recent home buyers what one piece of advice they would give prospective homeowners to make their property journey as smooth and pleasant as possible:
Unpack all the costs
First-time buyers need to understand all the costs involved in property acquisition, namely transfer costs, monthly mortgage repayments, rates, municipal tariffs and levies. “Many first-time buyers don’t realise that transfer costs are payable before transfer, and they also often hope to achieve this liquidity from their bond,” says Carol Reynolds and Gareth Bailey, Pam Golding Properties' area principals for Durban Coastal.
Use the bond calculator to see the extra costs of buying a home
Good advice is to ask your real estate agent to explain these costs to you, as well as the estimated timeline for the transfer process. Remember to find out what the occupational rental is if you plan to move into the property before transfer takes place. And, if you are buying into a sectional title development, ask to see the financial statements and if it’s a security estate, the estate rules.
Do a lifestyle audit
You may qualify for a bond of, say, R2.5 million, but can you afford this bond with your current living expenses? It helps to know your credit score, also, apply for a free pre-approval so that you know what price range you should be considering. You need to have money available after paying your bond for unexpected expenses.
Calculate what home loan amount you can actually afford
Apply the 50/30/20 rule
US Senator Elizabeth Warren, a bankruptcy expert, and her daughter, Amelia Warren Tyagi, popularised this rule: split your income into three spending categories: 50% goes to essential bills and monthly expenses, 20% toward financial goals and 30% to personal spending (all the stuff you like to spend money on but don’t really need). Put the money earmarked for your financial goals into a separate savings account.
Shop around, negotiate and be patient
It may be tempting to take the first bank offer, but rather see if you can secure a better interest rate.
Top up your bond
Pay extra towards your bond if you can. While the current low interest rate of 7% will considerably reduce your bond repayment, paying even R100 extra each month will make a significant dent in your interest and will also shorten the bond repayment period.
Make a deposit
Having a deposit on your bond will save you in interest over the long-term and will also make it easier to qualify for a home loan.
READ | Now is the ideal time to make the switch from tenant to homeowner
Buy new and save
Consider buying in a new development, especially as a first-home buyer, as there are no transfer costs.
Plan (and budget) for regular repairs
Be mindful that as a homeowner, you will be responsible for maintenance and repairs, and that this will come at a cost. Consider this when doing your long-term budget planning. Check your new home for any latent defects before you sign the offer to purchase so that you can budget accordingly.
Buy, don’t rent
If you budget correctly, your finances are in order and you have bought a home that you can afford, homeownership can in fact be cheaper than renting a property of a similar value - and nothing beats the peace of mind that comes with owning your own home.
“Buying a new home is an exciting decision - but make sure that it is an informed one. With the prime lending rate at 7%, the lowest it has been in five decades, it can be tempting to rush into a purchase. Make sure you can comfortably afford your dream home before you submit your offer to purchase,” says Carl Coetzee, CEO of BetterBond.
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