YourProperty Poser has received an interesting question from a reader who would like to buy property in a more upmarket area, but is concerned that her limited income could make it impossible to achieve this dream.
Our property expert says one of the major contributing factors that affect the affordability of property, is people’s state of debt. All forms of credit, including clothing accounts, vehicle finance and utilities determine what a prospective buyer can afford.
Proper management of your personal debt is a good starting point in the quest of becoming upwardly mobile in the property market. Prospective home buyers, whether they are buying for the first time or want to move to a bigger or better house, need to prioritise their expenditure and needs.
All prospective property buyers need to familiarise themselves with the new National Credit Act and its impact on the property market. If the bank is of the opinion that the consumer will be or can become over-committed, they will in all likelihood decline the bond application.
The act, however, also provides consumers with more rights and protection than before. These include that all persons can apply for credit and, if refused, they can request written reasons and challenge the information in their credit record.
It is generally “more affordable” to buy property in a new development. The developer carries the cost of the transfer duty in the form of VAT, which is usually just more than half of the total costs incurred by buyers.
These costs are typically the transfer costs payable to the attorney, the registration of bond cost payable to the attorney and the transfer duty payable to the South African Revenue Service.
It is also advisable to buy straight from plan.
Although the guarantees on your bond must be in place from the onset, payment only commences once the house is registered. This can take several months and by this time the value of the unit has usually increased substantially as well.
It is important to look at the ceiling of a specific area. It is generally a better investment and an easier way to enter the market to acquire a cheaper home in a good area rather than an expensive one in a cheaper area.
Most banks offer products to help first-time homeowners enter the market. In such instances loans of up to 108 per cent (the eight per cent accounts for the costs) can be approved.
Other factors to keep in mind include that there is no transfer duty on the sale of houses with a price tag under R500 000. Only the cost of transfer and the registration of the bond have to be paid.
Good news is that it is becoming a buyers’ market, partly because of the new National Credit Act. A serious seller might be persuaded to drop the asking price to be more in line with the loan that the bank is prepared to approve for the buyer.
Sellers must have realistic expectations and avoid overpricing their properties. The age, condition and locality of the property as well as demand and supply will to a large degree determine what a reasonable asking price would be.
If you are in the market for an investment rather than to upgrade, wait a bit to see what happens to the market and listing prices.
To ask a property related question, click here.