With the South African Reserve Bank’s announcement of interest rates cut of 100 basis points and earlier transfer duty exemption for properties below R1 million by the Minister of Finance, local regulations have made it attractive for first-time home buyers to enter the market.
Amidst the uncertainty, the outbreak of the novel Coronavirus has an unexpected upswing for South Africa’s property and real estate market. According to experts, South Africa is also likely to see a buyer’s market opening up during this period, with supply exceeding demand.
As a result, individuals looking to buy may be able to purchase property at prices lower than the average. During the viral outbreak, the US has seen a positive impact on the real estate market with Forbes reporting a 224% increase in reapplications for home financing and first-time home buyers taking advantage of the lower mortgages.
It remains critical for consumers to educate themselves about buying property, especially in these uncertain economic times. Below are some of the questions they should think of.
- What is the importance of owning or buying property?
Owning your own home, particularly for the first time, is an incredible feeling – a mixture of excitement, accomplishment and pride. Property ownership gives the sense of security, stability and peace of mind.
- Property generally appreciates over time increasing the value of your personal wealth.
- Should you wish to make any alterations like adding a room (like at the birth of your child), you can easily do so as the owner.
- Having own property gives you stability that guarantees your kids acceptance to attend local schools.
- Is this the right time to be buying property? Why do you say so?
The increase in the transfer duty threshold provides a very positive incentive, not only for first-time home buyers, but all those people purchasing homes as ultimately, they pay less transfer fees compared to last year.
- What does the announcement above mean to home buyers or property investors?
Consumers across the board, even for consumers wanting to purchase properties valued at more than R1 million, will realise some saving. For example, a consumer who purchases a house valued at R2.5 million would have a saving of R17 000 in transfer fees. The estate duty change significantly reduces the financial burden on those looking to enter the market. In addition, favourable lending conditions and an oversupply of new developments make this a good time to buy property.
- What tips can you give someone who is buying property for the first time?
- Determine value and location and the house you can afford.
- Save for a down payment, the higher it is the less monthly premium you pay.
- Understand all the upfront costs and save for them to avoid bottlenecks.
- Drive through the neighbourhood of the house you want to buy on various days at different times to check out traffic, noise and activity levels.
- What does this announcement mean to prospective buyers who are employed by government?
Government employees qualify for housing allowance of R1200 per month. So, employees wanting to own property and utilise these benefits can contact the housing access support services via the Government Employees Housing Scheme (GEHS) on www.Gehs.gov.za to understand their individual situations.
- What are the advantages or disadvantages of owning a property?
Below are the advantages and disadvantages that homeowners need to weigh in before making the commitment:
- There is pride in home ownership – you customise your home according to your own taste.
- Buying a house is a sound financial investment, values generally appreciate.
- No duty paid for properties below the threshold of R1 million.
- Monthly re-payments are stable as compared to renting.
- There are substantial upfront costs such as deposit, transfer duty, transferring attorney costs, moving costs, etc., which can cause stress if one is not financially prepared for this.
- If you are not financially stable, buying a house can lead to financial ruin as this monthly financial commitment can be up to 20 years and your house can be repossessed if you fail to honour the premiums.
- It is not just the bond repayments, ongoing costs include electricity, water, municipal rates & taxes, levies (if in a gated community), maintenance gardening, paining, etc.
- Selling your house can range between 3 months to a year depending on the market.
There are many costs associated with your dream home. Doing your financial homework upfront and analysis is key to having the peace of mind that you can cope with all the costs and enjoy your new home and the making of many happy memories.
Source: SA Property Insider