For those that had set their sights on living in a particular suburb or complex, only to have their dreams dashed by high valuations or unaffordable bond repayments, the scenario has changed – your dreams may now become a reality!
Despite the implications of a whole world under the threat of the coronavirus, there was a positive in South Africa – the interest rate decreases! What we now have is the lowest interest rate in 50 years. Sweetening the pot even more are the additional benefits that the Transfer Duty paid on the purchase of homes below R1-million was reduced to R0 in March this year, as well as banks now granting more 100% loans than ever.
Real estate agencies are reporting record sales as a result, with more first time home buyers and private property investors scooping up homes that are on the market, largely because they are too big or too small for their current owners. Nondumiso Ncapai, Head of Product at Absa Home Loans, says that it really is a case of “never has there been a better time to invest in property” and “invest in the property of your dreams”.
If you’ve set your sights on a particular area or complex that you would like to reside in however, Ncapai says there are many factors that you should consider before you advance. “Firstly you really must put effort into understanding the property growth of the region.
“You can retrieve property reports for a specific area from www.tpn.com as well as speaking to property agents operating in the area you are interested in. This will give you insights into what is currently happening in the area, as well as what can be expected in the future, such as an increase in traffic patterns, and new shopping and other developments.” However, one of the best ways to determine if a suburb really suits you and your family, is to visit the area, and at different times throughout the day to gain insights into the movement of people and traffic.
“Property reports while informative, are however objective, they don’t account for the look and feel, the atmosphere and the personality of a place. If your needs include shopping, hospitals, schools, religious sanctuaries, and security for example, you’ll want to visit these to see if they meet your expectations. Fibre and connectivity is also a necessity today, and an increasing interest in renewable energy is also being factored into decision-making.”
There are suburbs and individual properties that will tick all your boxes, but like most things, the more features, the more expensive. Ncapai however reminds us of the adage: ‘always try to buy the lowest priced property, in the best area’. “If you have the money to invest in a property, which with some improvement and repairs will increase in value to match those of your neighbours property, you are probably onto a good deal. No matter the area, you should however always do the sums; ie. your improvement costs vs the expected increase in your property’s value.. Be careful of over-capitalising though, unless you intend to live on the property for decades.”
Renovation and repair costs can also be deceiving. Not having a crystal ball means that what may seem affordable today, may not be true when the time comes to make the changes you require. “There are often more issues hidden beneath your original intention, and what you see on the surface, so it’s best to engage the services of a professional contractor to give you an idea of what you are in for.
“If you are afraid that the deal may slip through your fingers before you can get your quotes, you can make an offer to purchase (OTP) specifying that it is dependent on an acceptable quote from a contractor to attend to repairs and improvements. In this way you secure the property with the OTP but can still make a final decision based on the costs quoted by the contractor/s.”
Auctions have become an increasingly popular method of purchasing properties in a specific area, and are normally not subject to obtaining finance, as is the case when submitting a standard OTP through an estate agent. In some cases, auctions allow the bidder to secure finance up to 45 days, but if the bidder fails to provide the full amount, he/she is still liable for the auctioneer’s commission when can be as much as 10% of the original deal - in some cases even more.
“It’s not a good idea to rush into any deal however, without doing your homework. Any investor should invest first and foremost in growing their knowledge in the type of strategy they want to follow, be that buy-to-let, buy-to-flip, or buy-to-live. Reading and listening to as many resources as possible, and talking to professionals in the industry will reassure you that you are making the right decision,” says Ncapai.
Ncapai also highlights the need to engage with a bank, and/or its online tools, prior to setting your mind on specifics, which will give you the grounding for what is and isn’t affordable. “For example, Absa has a pre-qualification tool, the Absa Home Loan Estimator, which gives an indication of what the user can afford in terms of a home loan. It exceedingly quick and simple to use, and issues you with a A Home Loan Estimator Certificate. Note however, there is no guarantee that this is the home loan that the bank will grant, it is, as it says, an estimate.”
Yet another Absa tool that first-time homebuyers and private property investors are finding most useful is the Homeowner App, the first of its kind in the market when it was launched in 2014. It enables potential buyers to search for a home, to calculate home loan repayments and related costs, and provides information to access estate agents and the bank for further assistance.
When using these tools in conjunction with the Absa MyHomeOwnerJourney programme, which helps first-time home buyers understand the ins and outs of homeownership, a comprehensive picture emerges: what you can afford, what you can expect the buying process to cost, and what the monthly implications will be.
“Many are pleasantly surprised at the results given the latest low interest rates, and depending on individual circumstances following credit checks, are realising that they can now afford to enter into a property deal for that dream home, in the suburb of choice,” says Ncapai.