It’s back-to-basics time for homebuyers

The recent interest rate increase, added to the prospect of higher rentals this year, has given many young people who have been sitting on the fence a push to make a decision and buy their own homes now.
“They don’t want to risk not being able to qualify for a home loan if interest rates go up any more,” says Richard Gray, CEO of the Harcourts Real Estate group, “and in many areas, rentals have in any case begun to exceed the monthly home loan repayments for equivalent homes.

“This has led to a flurry of activity in the past three weeks, with many of our offices in popular metro areas, especially, reporting a spike in first-time purchasing.”

However, he says, such buyers should not now throw caution entirely to the wind. “There are certain home-buying basics that they must keep in mind, including the decision to never, ever overcommit their financial resources.“All too many first-time buyers, for example, come unstuck on the so-called hidden costs – that is, having calculated that they can (just) afford the deposit for a particular home they like, they fail to allow for the transfer duty, bond registration costs and legal fees they will have to pay, in cash.
“Or they may work out that they can reasonably comfortably afford the monthly repayments on a certain size home loan, and forget about also having to pay insurance premiums, rates and taxes, and municipal service charges, as well as the costs of maintaining their property.”
Such buyers, says Gray, will obviously have little or no leeway or reserves to meet any increases in home loan repayments when interest rates rise - and experts are predicting that they will go up at least another one percentage point this year –so they are at high risk of losing the home they bought with such excitement and of doing serious damage to their credit record for several years.
“All buyers, and especially those new to homeownership, would thus do well to take professional advice on the size of homeloan they can really afford, and thus what price home they should be looking for.
“Secondly, they should consider this: Absa’s latest figures show that existing homes are currently about 37% cheaper, metre for metre, than newly-built ones – a fact that is especially important for buyers with growing families, because it means they can buy almost a third more home for their money, and probably obviate the need for another home purchase for quite some time. And that, in turn, means that they are likely to make a better return on their property when they do eventually decide to sell.”
The third thing for new buyers to remember, Gray says, is the old adage which urges them to rather buy the worst house in a good area than the best house in a bad area.
“In other words, buyers should be guided by an experienced estate agent from a reputable agency when choosing to move to a new area – and then go on a hunt for properties which are sound and have development potential, rather than those which have already been fully developed or newly renovated.Apart from the fact that such properties are likely to be cheaper, they also offer the potential for bigger gains on resale.”

  Comment on this Article

  Please login to post comments

Post to my facebook wall
Characters remaining

    Latest Property News
    • 17 Nov 2017
      FWJK has announced the launch of its latest residential brand, the Lil’ Apple, which will be launched simultaneously in two developments in Cape Town and Umhlanga totaling 600 apartments. The Lil’ Apple is set to be a brand of FWJK’s New York style apartments which will be rolled out nationally.
    • 17 Nov 2017
      It’s been a tumultuous year on many fronts, with socio-political uncertainty setting the tone for much of South Africa’s economic activity yet despite this and seemingly counter-intuitively, the residential property market has held up well.
    • 17 Nov 2017
      The EAAB (the Estate Agency Affairs Board) recently claimed that around 50,000 illegal estate agents could currently be operating illegally.
    • 16 Nov 2017
      Penthouses are synonymous with New York – characterised by high-rise living that is decidedly luxurious and spacious. While exclusivity comes at a price, you can still create a “penthouse” look and feel in your existing apartment or even the upstairs bedroom of a double storey house with some clever design changes and styling touches.
    • 16 Nov 2017
      The area has long been popular with kite surfers and, with escalating property prices in Cape Town itself, is increasingly in demand with home owners who work in town, but are looking to invest in more affordable properties.
    • 16 Nov 2017
      Cape Town’s popularity as a world-class tourist destination has resulted in a spike in the number of homes available for holiday lets and fuelled investor demand for sectional title units with short term rental potential.
    • 15 Nov 2017
      Sappi, one of South Africa’s oldest global companies and a leading global supplier of sustainable woodfibre products, has moved its global and regional headquarters to a new site on the corner of Oxford and 14th Avenue in Rosebank.
    • 15 Nov 2017
      There’s an old saying in real estate that you should seek to make a profit when you buy, not only when you sell – and a large part of succeeding at that endeavour is buying a home in an area with desirable features that will enhance the resale value of your property.
    Subscribe to the MyProperty Newsletter

    Last Name  
    Email Address  
    Email Frequency
    Share this Page

    For Sale Property
    Rental Property
    More Options
    Connect with us