Spending habits are linked to property affordability

Private Property South Africa
Adrian Goslett

South Africans are not known as a nation of savers, in fact more often than not the opposite is true.

Statistics show that the majority of adults in this country do not think or plan ahead financially.Adrian Goslett, the CEO of RE/MAX of Southern Africa says that saving can and should become a way of life. “Large numbers of South Africans received a wake-up call when the National Credit Act was introduced in 2007.

Before government clamped down on irresponsible lending practices, it was easy to secure credit for just about any purchase, big or small, with little or no deposit. These days’ banks take a far-closer look at an applicant’s finances, obtain an overall picture of the credit history, the total amount of credit that is outstanding as well as the lenders ability to pay debt back. Banks have also increased the amount of the deposit required to secure larger amounts of money, including bonds or vehicle finance, although this is once again dropping.”He says that in many ways the recession exposed our weaknesses and highlighted the importance of having a household ‘slush fund’. Those who had spare cash in the bank were, in many instances, able to keep the wolf from the door, while those that were swamped by debt didn’t.

With this is mind, Goslett says that it is now more important than ever for those planning to invest in property to get finances under control and implement a budget, before they buy property.

There are a number of ways consumers can cut back on living expenses and areas that should be looked at include:

  • Writing out and sticking to a budget

  • Eating out less

  • Shopping around for the best prices

  • Paying cash wherever possible

  • Reviewing insurance policies and medical aids to ensure you are getting the best deal available

  • Saving on electricity and water costs

  • Curtailing unnecessary purchases and debt

  • Draw up a savings plan, decide how much you want to save on a monthly basis and stick to it.

Managing debt has become one of the most important aspects of life in South Africa. It has been estimated that seven million South Africans are struggling to pay off their debts and it was recently stated that over 52% of South Africans have a bad credit rating. “These figures are alarming, given that the banks have taken a far stricter approach to credit and will not extend finance to anyone whose financial history is not squeaky clean,” says Goslett.The ratio of household debt to disposable income has proved to be the biggest stumbling block facing those who are trying to raise finance. Simply put, many South Africans are still struggling to get to grips with their outstanding debt.

“On the other hand,” he says, “individuals who have money set aside for a deposit are finding it easier to buy the house of their choice and are taking advantage of the good deals currently available. It is distressing to note that while the current market conditions are ideal for investing, many are unable to invest, simply because they have failed to get their financial house in order over the last few years.”While this advice may not be the be-all and end-all of money management as what works for some, doesn’t for others, but it certainly is a good starting point for a year that is successful financially.

Share:

Found this content useful?

Get the best of Private Property's latest news and advice delivered straight to your inbox each week

Related Articles

To rent or buy: That is the question
In a depressed market, such as the one we are currently in, many people find themselves asking whether it is more financially prudent to buy their own home or to rent one instead.
Making the decision to buy
The decision a property buyer makes today, could affect their financial wellbeing and lifestyle for the rest of their lives.
Pros and Cons of a joint home loan
If you’re battling to get onto the housing ladder, applying for a home loan together with someone else can improve your chances. You do however need to be aware of the pros and cons.
;