With a growing awareness of all the costs associated with buying a home, more buyers are limiting the size and value of their purchase.
Homebuyers are often caught off-guard by the additional costs associated with buying a home, but growing awareness of these expenses means many buyers are taking a more conservative approach to home buying. A recent FNB Estate Agent Survey estimates 13% of sellers are selling their property to downscale due to financial pressure. John Loos, strategist: FNB, says an individual can reduce costs such as home maintenance, rates and tariffs bills, insurance and furniture by limiting the size and value of a home.
Many potential homebuyers over-commit financially, taking out a 100% loan-to-value bond and more debt to finance transaction costs or furniture and appliances for their new home. However, the smaller the home, the less space for material items and less electricity consumption, and the lower the value of the home, the less the rates bill should be with the garden and swimming pool having lower water, maintenance and insurance needs
Lesiba Mooka, CEO: Cobalt Blue Properties, says with the introduction of stricter lending rules the number of homebuyers purchasing properties beyond their means has drastically decreased in the last 10 years, with fewer properties repossessed as a result. However, around 3% to 5% of homeowners are still unable to make monthly payments. He says buyers should be prepared for costs such as paying a deposit if the financier doesn’t grant a 100% bond; legal fees; and bond registration and transfer costs.
Allowance should be made for additional expenses such as maintenance costs, monthly bond repayment increases and bank charges, which might arise once the property has been purchased. Saving 25% of the purchase price of the property should cover extra costs
David Rebe, CEO: Sandak-Lewin Property Trust, says costs that are often not factored into the price of home buying include movers, insurance premiums, security and increased costs in rates, taxes and maintenance. He says if the buyer moves into a property and there’s a delay in transferring the property into their name, there will also be occupational rental to pay as they will be living in someone else’s house.
“Buyers also need to take into account utilities such as phones, electricity and water, cleaning carpets, hanging curtains or painting. If a buyer is purchasing a sectional-title property, they need to pay the monthly levy, but should ask about special projects that may result in a special levy. Individuals should buy property with a buffer for economic changes, increases in interest rates, utilities bills and being unemployed for a while,” says Rebe.
This article originally appeared in Neighbourhood, Sunday Times.