By Essie Bester
The Covid-19 pandemic and the question whether you are still going to have a job undoubtedly cause many people a lot of financial stress. However, it is also true that the South African home market is now offering the most favourable buying conditions in years.
With interest rates at their lowest in 47 years and house prices that are expected to go down for the first time in years, it could be smart – also for first-time buyers – to buy a house now, according to roleplayers in the business.
The record-low interest rates, together with a number of financially stressed sellers who are probably going to dump properties on the market in the next few months, are going to create a cheap access point for home owners. It is also expected that sellers will be more than willing to negotiate over asking prices for the next 12 to 18 months.
First-time buyers who are thinking about entering the property market should, however, do their homework and make sure that they understand the costs involved in buying a house – e.g. attorneys’ fees, bond registration fees and running costs such as rates and taxes, water, electricity and insurance.
“Apart from the affordability of the monthly instalments the ongoing costs regarding the ownership of a house must also be taken into consideration,” says John Manyike, Head of Financial Education at Old Mutual. Remember that interest rates move up as well as down. “Consider different future scenarios and build a buffer into your calculations before you make the final decision.”
Is now a good time to buy?
Whether now is a good time to buy or not will depend on the individual’s situation, says Dr Bambie Heiberg, one of South Africa’s top estate agents and head of Heiberg Estates. If you have job and income security, it could be a wonderful opportunity for first-time buyers. Most financial planners, however, recommend a cautious approach before you buy, with a reserve fund with 6–12 months’ living costs in the bank. With Covid-19 and Moody’s recent downgrading of our public debt to junk status, now is not the time for a shortage of funds.
Will my loan application be granted?
The downgrading by Moody’s undoubtedly means that our recession is going to deepen. “Approval of loan applications will in future probably be harder to approve to provide for risks such as potential job losses and salary decreases of clients,” warns Heiberg. Banks will, however, as usual lend on the basis of good credit records and steady incomes.
Carl Coetzee, the CEO of BetterBond, a firm that preapproves you and applies for a homeloan at banks on your behalf, says that first-time home buyers are very active at this time. According to him they constituted about 70% of all BetterBond’s applications submitted during June. Find out for yourself at https://www.property24.com/calculators/bond how much you, based on your income and the deposit, can afford to spend on a new house.
If you want to buy a house …
have a sound credit record;
have enough money for a deposit;
pay what you can afford;
budget for additional costs; and
obtain preapproval for a homeloan.
- Pick the best estate agent and do your homework (look at the neighbourhood and price class).
- Do a proper buyer’s consultation with your estate agent so that he or she knows what you want.
- Go and view your selected properties and discuss each one in detail with the parties concerned, your estate agent included.
- When the right property urns up and before you sign any purchase (offer to buy) contract, you need to:
Carefully examine the house. Ask about the roof, gutters, electrical wiring, foundation, etc. If there are defects, make provision for repairs for the seller’s account.
Answer these questions first:
Is the price in line with similar properties in the area?
How many other properties in the area are for sale?
Why is the owner selling?
For how long has the property been in the market?
How much work does the property need and what will it cost?
Have your attorney scrutinise the purchase contract before you sign it. Question anything that is not clear. Enquire about additional costs such as taxes and transfer fees. All terms and promises must form part of the written contract. Verbal agreements cannot be enforced. A document signed by you and accepted by the seller can be binding.
Make sure that the purchase contract provides for the issue of a certificate of compliance with regard to the electrical installation, a certificate for electrical fencing, a pest-control certificate and/or a gas compliance certificate.
If you need a mortgage loan, you must make provision for the valuation and registration costs of the property (ask your attorney about this). Make the sale subject to the acquisition of a loan if you are not sure whether you will get a loan that will cover the purchase price and/or other costs.
- Make the seller an offer if you are satisfied. Offer your price or conditions in this document, which may be accepted or rejected.
- The seller may make a counter offer if the conditions of the first offer are not acceptable.
- When the offer is accepted the hard work starts for the transferring attorney, the bond applicant, the financing bank, the valuer, the cancellation attorney and the deeds office. After everybody’s work has been scrutinised, the deeds office will register the property.
- Before moving in – check the date of occupation in the purchase contract. If you move in before the house is in your name, you will be expected to pay rent. Make sure who is responsible for paying rates and taxes, levies and insurance premiums during this period.