The main reasons are interest rates of 8.5% at its lowest in 40 years, increased offerings of 100% home loans by banks, extended re-payment periods by some banks of up to 30 years as opposed to 20 years previously, as well as buyers of entry level and affordable house properties below the value of R600 000 being exempt from paying transfer duties.
In addition are mortgage originators doing their utmost in negotiating the best deals from major banks, now showing greater leniency toward 100% bonds compared to that of the past four years. Although property professionals maintain that cash deposits should remain king, because it hugely reduces interest re-paid on large borrowed capital amounts, more qualifying buyers are enjoying 100% loan offerings from banking institutions.
Last week Rudi Botha of BetterBond said approximately four out of every 10 home loans currently approved are 100% loans, mostly going to first-time buyers, including those in the affordable property market. He said: “In addition the average percentage deposit required by first-time buyers who do not manage to secure a 100% loan has declined from 11,5% of the purchase price to 9%. So effectively, the average deposit amount for such buyers has fallen to around R56 000, compared to R71 000 earlier this year.” Despite increases in average house prices Betterbond reported that first-time buyers accounted for 42% of all bond applications in July, compared to 37% four months ago, and the percentage of loans being granted to first-time buyers has at the same time risen from 35% to 39%.
Other costs to be factored in by first time homebuyers, in addition to monthly expenses of bond re-payments, building insurance, rates and taxes, electricity and maintenance, are the once off lay-out costs such as transfer duty, bank costs for the bond registration, and legal conveyance fees. Transfer duties can account for a large portion of initial lay-out costs for first time home buyers depending on property prices. Firstly, off plan property purchases made directly from developers are exempt from transfer duty, but does however include VAT which is included in the purchase price and therefore the total bank loan amount. Fortunate for entry level first time home buyers is the fact that either zero, or very low transfer duty amounts apply.
Those purchasing homes below R600 000, are completely exempt from Transfer Duty, whereas for properties up to R1-million in price, only 3% is calculated for the value exceeding R1-million, totalling R12 000. For properties priced at R1 to R1.5-million an additional 5% of the value exceeding R1-million (R25 000) is payable, bringing transfer duty to R37 000, while an additional 8% is charged on values exceeding R1.5-million. When it comes to legal fees, the lower the property price the lower the conveyance fees, ranging between 0.5% to 1.8% of property values, and in some cases maybe included into bank loan amounts.
Examples of entry level properties currently listed below the R600 000 price range includes a ground floor apartment in Cape Town’s Northern Suburbs in Parow West for sale at R 550,000, comprising two bedrooms, and one bathroom. A small art-deco house ready for upgrading with Oregon floors and bay windows in Bez Valley in Johannesburg is priced at R550 000, while a two bedroom, one bathroom simplex in Durban’s Glenmore is on the market for R490 000.
And so, to be rewarded newfound status from rent paying tenant to proud property owner, meet the bank’s bottom line of unblemished financial records, scrupulous credit behaviour, steady income patterns, and no criminal offences.