The Absa Homeowner Sentiment Index and its sub-indices are based on a quarterly survey of existing and prospective homeowners in major urban areas in South Africa, and present insight on consumer sentiment regarding the buying, selling, investing, renting and the renovating of residential property, as well as property market conditions in general.
In the current property market, buyers are kingpins heavily courted by developers and estate agents alike – but first-time buyers in particular should take care not to be seduced into serious and potentially costly mistakes.
So says Berry Everitt, MD of the Chas Everitt International property group, who notes that in the excitement of hunting for a first home, many buyers become over-enthusiastic and run the risk of succumbing to “hype”, particularly in new developments where they may be subjected to high-pressure sales tactics.
“And signing an agreement to buy before they have done their homework properly, may quickly take the gloss off owning their own home.
“Therefore, they should keep basics in mind, such as studying the market and finding out what implications fluctuating interest rates hold for them and what the relative advantages of different types of properties are, such as sectional title as opposed to freehold ownership.”
Writing in the Property Signposts newsletter, he says it is always a good idea for buyers to visit as many show houses as possible and to consult estate agents about the state of the market in areas where they would like to settle. “And they should never be afraid to ask questions and have them answered to their satisfaction.
“Above all, though, they should resist temptation to over-commit themselves financially in the hope that a bonus at the end of the year or an expected salary increase will make up any temporary shortfall. Also, of course, all related costs such as transfer duty and legal fees should be taken into account when they draw up their budget and decide how much to spend on a home.”
It is far better, Everitt says, to under-spend rather than overspend on a first home, and to put any spare funds into the bond to reduce interest and to build equity. “In this way buyers will be in a better financial position when circumstances dictate it is time to upgrade to a bigger property.”
Published By: Chas Everitt
Freehold property enclosed by boundary walls are referred to as “cluster homes” in South Africa. Cluster homes are commonly governed by a homeowners associations. Over the last few years this type of property development has seen an increase and their is some confusion over the legal status of cluster homes among South Africans.
In South Africa their is two ways in which you can own a property namely freehold and sectional title. With freehold the property is registered in your own name and you are free to manage the property independently. In the case of a sectional title you buy not only your unit but also an interest in common property such as gardens, swimming pools and security. you are responsible for the upkeep of your own unit but the administration and maintenance of the complex and common property are the responsibility of the body corporate and you are subject to the rules of the body corporate.
Cluster homes property are sold as freehold in south Africa. This means you gain individual title to your unit and garden and are entitled to use other parts of the property such as roads. Cluster homes are governed by a homeowners’ association with a constitution drawn up by elected Trustees and approved by a percentage of the owners. Because cluster homes are bought as freehold many owners believe that they are in no way tied to any association and that there is no legal link between them and their neighbours. The reality is that although the cluster home is bought as freehold property their is a clause in the offer to purchase and the title deed outlining that all purchasers acknowledged that they would automatically belong to the homeowners’ association.
The rules in a cluster development would encompass operational management issues and common area payments and as an owner you will be bound by a levy payment. In addition, a well-drafted set of rules will include architectural guidelines and will impose conditions on homeowners disallowing certain action.
Non-Residents can feel comfortable when investing in South African property as the property market for overseas buyers are well regulated in South Africa. No significant restrictions apply to non-resident property buyers in South Africa and the overseas buyer can enter the South African property market with confidence.
Buy Property in Own Name or Through Legal Holding Entity
A non-resident buying property in South Africa has the option of buying the property in their own name or through a legal holding entity such as a trust or company structure. Some non-residents prefer buying property through a legal holding entity for taxation, management and asset protection reasons. You should consider, through consultation with a lawyer or property expert, which option will suit your individual circumstances the best.
South African Property Ownership Methods
Share block, freehold, leasehold or sectional title are the methods of property ownership in South Africa that non-residents can choose from. Most non-resident property buyers choose the leasehold method of property ownership as this method of transfer is much more flexible than the other methods.
South African Exchange Control Regulations
Generally overseas property buyers who retain their non-resident status can remit and repatriate funds freely overseas, this includes capital gains made after the deduction of taxes due. Once an individual becomes a resident in South Africa he/she may only remit and repatriate funds for a period of five years before he/she falls under the exchange control restrictions imposed on South African residents.
South African Property Contracts and Documentation
When a suitable property has been found and a price has been agreed upon, either an ‘offer to purchase’ or a ‘deed of sale’ can be signed. Both documents are legally binding and it is advisable to consult legal advice before signing either of the documents. In fact it is a good option to have the services of a lawyer to assist throughout the entire conveyance and purchase process to check any contracts and to carry out title and land registry searches and checks.
Transfer and Registration of Property
The transfer and registration of property is usually handled by the seller’s conveyance lawyer. The seller will give the lawyers power of attorney to handle the process of registering the property at the Deeds Office in the name of the non-resident buyer.
South African Property Taxes, Fees and Charges
When property is purchased in South Africa transfer duty is levied by the government; the duty is charged at a variable rate of between 1 and 8% for private property ownership or 10% for a property purchased via a legal entity. Other fees involved in buying a property in South Africa include transfer costs of between 1 and 2%, mortgage costs, lawyer’s fees and estate agents fees which are normally included in the purchase price.
Stay Informed of New Property Developments
New property developments are usually quickly snatched up by investors with the right connections long before investors new to the game have an opportunity to find out about the property. The serious property investor needs to have ongoing contact with estate agents in South Africa who have good contacts with developers and is able to inform the investor timeously when property become available.
Build Up Available Capital
If you are serious about becoming a property investor you will need a certain amount of available capital to start off with. Many developers will require a deposit from a buyer to ensure that the investor is serious before agreeing to the sale; as an property investor you do not want to be in the position of having a excellent property investment opportunity but no cash deposit to secure it.
Obtain a Pre-Approved Home Loan
Be prepared for when a property investment opportunity comes your way obtaining a pre-approved home loan. This will ensure that you now exactly if you can afford the property and what information the bank requires from you.
Property Investment With Friends
If you cannot afford to invest in a property on your own you can form a syndicate with friends. You can co-sign for the home loan in your individual capacities or form a closed corporation.
Property Management Company
Find a good property management company to manage your tenants. They will be responsible for finding a suitable tenant, drawing up a contract, regularly inspecting the property, collecting the rent and the paying levies on your behalf.
Long Term Property Investment
The full potential of property investment is seen in the long term. While good profits can be made in the short term the big fortunes are acquired over long periods of time.
Investing in property within South Africa is still a sound option for serious investors. The following points highlight the reasons why you should invest in property and in particular South African property.
Property Is a Relatively Stable Investment Option
Although stock market related investments can at times bring forth very big returns, it is also very unstable and there is the possibility that you can lose a portion of your capital. It is advisable that you balance your investment portfolio with a relatively stable option such as what is available in the South African property market.
Shortage of Property in South Africa
South Africa’s political past has left the country with a shortage of good housing and the South African government has made fixing the housing problem a high priority. The housing policy of the South African government will lead to a long term structural growth potential within the South African property market with migration to better neighborhoods and better property set to continue for a long time.
Property Cycles in South Africa
Most people long to have their own property and the sense of security and comfort of having a growing asset that goes with it. As young people leave school and start to work they enter the property cycle through renting a flat, buying a flat, selling a flat and then buying a small house or townhouse. As they become more financially secure they will invest in their dream property which they are likely to sell when they go in retirement in order to move into a smaller house or townhouse. A South African property investor benefits through out the property cycle due the ever present demand for property in South Africa.
South African Property Market is Relatively Stable in an Unstable World
Globally many countries have become targets of extremists with terrorist attacks having negative effects on the economies and stock markets of the countries affected. South Africa has a relatively balanced position within global opinion and is one of the countries least effected by extremist activities. This position of balance is causing a lot of investors abroad to start looking at South Africa for property investment opportunities.
Rental Property in South Africa
Obtain a South African home loan and invest in property which you then rent out. The rental from the tenant will help you pay off your bond and the value of the property will keep on increasing.
Banks plan to have spent close to R47-billion to finance mortgages for “affordable housing” by the end of this year.
The Banking Association of SA said the four major banks had spent R39.6-billion by the end of March on financing new homes and providing home-improvement loans for the affordable housing market. The association said banks were well on target to meet and exceed their December deadline for spending the R42-billion earmarked for housing loans for households earning between R1500 and R10000 a month. It said banks had altered Financial Sector Charter projections and, by the end of the year, they expected to have spent R46.8-billion on affordable housing.
An example of the affordable housing efforts of the banks is the mixed-use development, Cosmo City, at Kya Sands, north of Johannesburg. It will have 12500 housing units, made up of fully and partially subsidised dwellings, rental apartments and bonded houses. The houses, aimed at civil servants such as teachers, nurses and police, range from 45m² to 65m². They cost between R180000 and R250000 in 2006, but t oday some of the properties are worth more than R350000.
The Financial Sector Charter housing co- ordinator for the association, Pierre Venter, said two thirds of the R39.6-billion was spent on financing new houses and the remainder on home improvements. Venter said the banks had at first thought that 80percent of the funding would be used to finance new houses.
The 67percent spend reflected the continued problem of a shortage of stock for affordable housing. He said the banking body wanted the government to tackle the issue. It had commissioned two reports on the drivers of increase in the cost of building, and projections of the housing supply between next year and 2013.
The association said its latest research, in 2005, revealed an estimated 650000-unit backlog in the affordable-housing market. But the department of housing currently faces a 2.3million backlog for Breaking New Ground housing. “The commissioned studies, expected to be available in the next two months, are critical for us to assess how much progress we have made in the partnership and what we need to do in future. “The affordable-housing backlog is also under strain from issues of land availability and infrastructure development. “Some areas have not been upgraded to accommodate densification and we need speedy implementation of infrastructure for the new developments,” said Venter. The banking body said it was encouraged by the achievements despite the challenges.
So you decided to sell your property and you are dreaming of what you are going to buy with the profit you will be making. But before you start spending you need be aware of the costs involved in selling your property in South Africa and how much it will eat into your profit.
Commission by Estate Agents
The commission taken by the estate agent is usually a standard figure of 7.5% ( excluding VAT ), which is the current recommended percentage set by the Estate Agency Affairs Board. This is not a set figure and you can negotiate this figure before signing a contract with an agency.
If you want to avoid the commission on the sale of the property you can always decide to sell your property privately.
Bond Cancellation Fees
A fee for canceling your current bond will be deducted from the amount the banks pays out when your property is sold.
If your home was purchased in a legal entity other than your private name, you will have to pay Capital Gains Tax (CGT). Even if the property is purchased in your private name you will still have to pay tax if the profit on the sale of the property is more than one million rand.
Local Council Costs
The conveyancer will hold back an amount on behalf of the local council to cover rates, taxes, water and lights. In some instances the council may reserve an amount to cover up to 6 months of services. Although this money does get repaid it is an amount that will be missing from that lump sum payment you’re expecting on the sale of your property.
When selling your property you also need to keep the cost of moving to a new property in mind. You may have to buy new blinds or curtains, clean the carpets, obtain new furniture and the new house may need to be repainted.
This article looks at the pros and cons of renting property and the pros and cons of owning your own property. We will be considering whether it is better to rent or buy property in South Africa’s current environment.
The current high property prices in South Africa has the effect of property being rented out at a substantially lower amount per month then what the bond repayments on the property would be. A property worth R800 000 could easily be rented at about R4 000 a month while bond repayments on a property of that value will be round about R10 000. The R6 000 saved on renting over buying the property makes a strong argument for renting property.
Although this equation seem to endorse renting over buying it does not take into consideration the effects of ownership or rental over a longer period of time. Renting the property in our example will most likely be subject to annual increases whilst the value of the property is also likely to increase on an annual basis. This will have the effect of increase in capital growth for the owner over a period of time while the person renting will have to increase yearly expenditure with no capital gain.
Renting can pay off if you use the extra monthly saving wisely. The extra monthly savings should go towards wise investing and not towards purchases to enhance your lifestyle. Over the long run purchasing property remain the better option as the bond will reduce over a period of time and the property will gradually turn in to positive equity.
In conclusion it can be deduced that renting property over a short period is a reasonable option but over a longer period owning a property is the sensible option. If you cant afford to buy a property right now start off renting and invest your extra expendable income so that it can be used towards purchasing a property further down the line.
Construction at a new, upmarket 20-storey serviced apartment block on the corner of Cape Town’s Pepper, Loop and Long Streets is well underway.
A total of 233 apartments, ranging from studios to luxury duplex units and penthouses, will be built at a cost of R119m. “The amenities include a fitness centre, laundry and cleaning services, swimming pool and sun-deck, private movie theatre, 24-hour security, undercover parking and a concierge to attend to residents’ every indulgent need,” explains Mark Belman, business development director at Grinaker-LTA Building Cape.
The contractor is undertaking the construction of the apartment block’s external shell, including a traditional concrete structure, external facades and external waterproofing, as well as the internal division walls, including door frames, plaster, floor screeds and the first fix of plumbing, drainage and electrical. The complete installation of the mechanical ventilation, sprinklers, fire protection, roof construction, lift installation, swimming pool, timber deck and the fire door installation will also be undertaken.
Some 700,000 bricks will be used in the construction project, as well as 16 600 m3 of concrete and 881 tons of reinforcing.