Since May 2009 it has become compulsory for homeowners to be in possession of a valid Electrical Certificate of Compliance (ECOC). This document verifies that the electrical work and installations that have been completed on a property are up to the regulations required by the South African National Standards and are safe.
Why is an electrical certificate so important for a homeowner? Adrian Goslett, CEO of RE/MAX of Southern Africa, says that aside from the fact that the certificate is proof that the electrical installation is safe, the law requires a homeowner to be in possessions of an ECOC, as do home insurance companies. "If a property incurs any damage as a result of an electrical fault, the insurance company will require the homeowner to provide them with a valid electrical certificate. Failure to produce the document could result in the insurance company repudiating the claim," says Goslett.
Prior to the legislative change during 2009, and ECOC remained valid indefinitely and could be transferred without limitation, unless changes were made to the electrical installations. Essentially this meant that the seller could provide the buyer with same ECOC that was provided to them when they purchased the home, regardless of how long ago that was.
Goslett notes that these days, during the sale process of a property, the conveyancer would need to obtain the original ECOC from the seller before registration takes place. This means that the seller must get a certified electrician to inspect the electrical installations, if the ECOC in the seller's possession is older than two years or if any changes have been made to the electrical installations during this time. The original compliance certificate must eventually be retained by the buyer after it has been presented to the conveyancing attorneys, as legislation requires a property owner to produce a valid certificate of compliance on request to an inspector.
According to Goslett, it is the responsibility of the homeowner to check whether the electrician doing any electrical installation on their property is registered with the relevant authorities and has a wireman's license or is working under the direct supervision of an electrician with a wireman's license. If they do not have the necessary qualifications, they will be unable to provide an electrical compliance certificate on the work that they do. "The homeowner must also request to see the contractor's registration card and accreditation certificate. This is particularly important in light of the fact that electricians do not have to guarantee the electrical system is in working order, but only that it is safe, and the new requirement that a test certificate must accompany the ECOC," says Goslett.
He notes that once the ECOC has been transferred into the name of the new homeowner, any alterations made by the new owner to the electrical installation through renovation of the property, for example, will not be covered under that certificate and a separate certificate will be required to cover the additional installations. Goslett says that alternatively, the entire installation can be checked one the additional work has been complete and an entirely new certificate can be issued covering all the electrical work. "As a rule of thumb it is good maintenance practice to have the property re-inspected for wear and tear every two years, regardless of whether the owner is intending to sell the property or not. This will ensure that the wiring in the home remains safe during the period the homeowner occupies the residence," he says.
In the instance where the property is rented out, Goslett says that the owner is required to possess a valid ECOC for the electrical installation in that property and provide the tenant with a copy for their records. "According to the law, no property may be rented out without the landlord having a valid compliance certificate and rental agents are required to see the ECOC before they can assist with finding a tenant for the property," he concludes.
Friday 28 December 2012
TAKING ADVANTAGE OF THE CURRENT REAL ESTATE MARKET
There is no doubt that today's real estate environment is primed for buyers looking to take advantage of the recovering phase of the market cycle, says Adrian Goslett, CEO of RE/MAX of Southern Africa. The current market has brought about a price correction over the past few years along with low interest rate levels that were last seen four decades ago.
"However," says Goslett, "when it comes to entering the world of real estate investment, it is vital that potential buyers arm themselves with the correct tools to make informed and wise purchase decisions."
There are a number of aspects that property buyers need to keep in mind when they want to make the most of their investment options. Goslett offers some advice and tips for property buyers to consider:
Knowledge is power
It is an age-old adage that we have heard over and over again, and for good reason. If you think education is expensive, try ignorance. Goslett says that the key to any property investment in any market is to do the necessary research and never invest in something that you don't fully understand. He notes that in order to get the most out of a property investment, buyers should look at all aspects such as location, possible additional costs that they could potentially incur if they want to renovate the property and investigate the maintenance costs. He says that essentially, to make the best investment in the current market conditions, buyers need to know the true value of the property. This can be done by comparing the rate per square meter of properties of the same standard in the same area to help pinpoint the best value. Having knowledge will empower an investor to discern between a good buy and a bad one.
Seek advice from professionals
An experienced, reputable real estate agent with working knowledge of an area will be the best person to seek advice from regarding purchasing property in the suburb. Estate agents have a wealth of knowledge regarding the market along with access to a variety of statistics and property tools that enable them to correctly determine fair market value.
Use technology
Rapid advancement in technology has meant that vast masses of information are readily available at the click of a button. Goslett says that the internet can be a remarkable tool for property buyers to search for the property in various areas without having to leave the comfort of their own home or office. There is a large amount of information on almost every town or city online, which includes types of properties and pricing. Using the internet and property search portals will save the buyer precious amounts of time and money.
Only consider the facts
It is important for buyers to disregard the other, intangible factors and only base their decision on the facts. Goslett says that buyers will need to base their choices on figures that they know, rather than feelings they may have regarding a certain investment. He notes that not everyone sees things in the same way. "While it might be important for you to have a view, there is no guarantee that prospective buyers will value it as highly as you do when you resell the house," he says.
Focus on motivated sellers
Property buyers should ask sellers their reason for selling the property, as this will give the buyer an indication as to how eager the seller is to move. If the seller is relocating and has put down an offer on another property, they will be more likely to negotiate on the asking price.
Work with people you trust
A house is an expensive investment with great potential for building wealth if undertaken correctly, so getting the truth now can save you a lot of money in the future. Goslett says that this is why it is important for property buyers to work with people that they can trust.
"It is important to remember that property investments are cyclical, which means they will go through both highs and lows. It is for this reason that property should be viewed as a long term investment with property buyers only looking to see the true value of their investment after a period of five years at least," concludes Goslett.
"However," says Goslett, "when it comes to entering the world of real estate investment, it is vital that potential buyers arm themselves with the correct tools to make informed and wise purchase decisions."
There are a number of aspects that property buyers need to keep in mind when they want to make the most of their investment options. Goslett offers some advice and tips for property buyers to consider:
Knowledge is power
It is an age-old adage that we have heard over and over again, and for good reason. If you think education is expensive, try ignorance. Goslett says that the key to any property investment in any market is to do the necessary research and never invest in something that you don't fully understand. He notes that in order to get the most out of a property investment, buyers should look at all aspects such as location, possible additional costs that they could potentially incur if they want to renovate the property and investigate the maintenance costs. He says that essentially, to make the best investment in the current market conditions, buyers need to know the true value of the property. This can be done by comparing the rate per square meter of properties of the same standard in the same area to help pinpoint the best value. Having knowledge will empower an investor to discern between a good buy and a bad one.
Seek advice from professionals
An experienced, reputable real estate agent with working knowledge of an area will be the best person to seek advice from regarding purchasing property in the suburb. Estate agents have a wealth of knowledge regarding the market along with access to a variety of statistics and property tools that enable them to correctly determine fair market value.
Use technology
Rapid advancement in technology has meant that vast masses of information are readily available at the click of a button. Goslett says that the internet can be a remarkable tool for property buyers to search for the property in various areas without having to leave the comfort of their own home or office. There is a large amount of information on almost every town or city online, which includes types of properties and pricing. Using the internet and property search portals will save the buyer precious amounts of time and money.
Only consider the facts
It is important for buyers to disregard the other, intangible factors and only base their decision on the facts. Goslett says that buyers will need to base their choices on figures that they know, rather than feelings they may have regarding a certain investment. He notes that not everyone sees things in the same way. "While it might be important for you to have a view, there is no guarantee that prospective buyers will value it as highly as you do when you resell the house," he says.
Focus on motivated sellers
Property buyers should ask sellers their reason for selling the property, as this will give the buyer an indication as to how eager the seller is to move. If the seller is relocating and has put down an offer on another property, they will be more likely to negotiate on the asking price.
Work with people you trust
A house is an expensive investment with great potential for building wealth if undertaken correctly, so getting the truth now can save you a lot of money in the future. Goslett says that this is why it is important for property buyers to work with people that they can trust.
"It is important to remember that property investments are cyclical, which means they will go through both highs and lows. It is for this reason that property should be viewed as a long term investment with property buyers only looking to see the true value of their investment after a period of five years at least," concludes Goslett.
WHAT KIND OF BUYER WOULD YOUR HOME APPEAL TO?
When it comes to selling property in today's highly competitive real estate market sellers will need to have an edge to stand out from the crowd, says Adrian Goslett, CEO of RE/MAX of Southern Africa. The key, he says, is for sellers and their estate agents to make a distinction between the types of buyers they are targeting to order to market the property in the most appropriate way.
Goslett notes that establishing the type of buyer they are dealing with will assist in determining the buyer's needs and how they should be approached. He says that different features of a particular home will appeal to different kinds of buyers, depending on their criteria and type of property they are looking for. Goslett explains that generally property buyers will fall into one of four main categories:
Retail buyers
Although this type of buyer can be subdivided into smaller groups such as family buyers, young working couples, first-time or retired buyers, this is the average home buyer who is in the market to purchase a primary residence. They are buyers who have access to finance or enough money saved up to purchase a property cash. As the large majority of these buyers will require financing, an important aspect for this type of buyer will be the home's price and their level of affordability. Features that will be important to them will be proximity to their place of work and amenities such as schools, medical facilities and shopping centre's.
Buy-to-let investors
A property that can generate revenue while it appreciates in value over the long term is the main concern for this buyer. They are generally looking for a secure long-term investment that will be relatively low maintenance. Goslett says that these buyers are normally looking for sectional title units that require little or no renovation and can be rented out immediately to start earning income. In some cases they are also looking for larger homes that can be rented to upmarket tenants or students in a commune set-up.
Fix-and-flip investors
Fix-and-flip investors are normally full-time property investors looking for properties that are selling substantially below the market norm in a specific area. This type of investor will be looking for a property in need of renovation that they can restore and sell in a reasonably short period of time for a return on investment.
Hybrid buyers
According to Goslett, these buyers are not full-time property investors but they have 100% cash or a large deposit and good credit records. These buyers normally wait for the property market to fall or for a really good deal to come along before they make an investment. They generally prefer properties that don't require renovations and can be leased out as soon as possible.
Goslett says that although it is important for sellers to know the type of buyer they are dealing with, it is equally important that the seller is serious about selling their home and is open to negotiation. "With the market currently favouring buyers, sellers will need to be willing to negotiate. If a seller is merely putting their property on the market to see what they can get and they are not willing to budge on their asking price, it will be very difficult for them to sell their home, especially if their price is not market related," he says.
"A successful sales transaction occurs when the criteria of a buyer is matched by a property on sale from a serious seller. An experienced agent from a reputable real estate company can help to connect the right buyer with the right property and facilitate the sales process to ensure it is a hassle free experience," Goslett concludes.
Goslett notes that establishing the type of buyer they are dealing with will assist in determining the buyer's needs and how they should be approached. He says that different features of a particular home will appeal to different kinds of buyers, depending on their criteria and type of property they are looking for. Goslett explains that generally property buyers will fall into one of four main categories:
Retail buyers
Although this type of buyer can be subdivided into smaller groups such as family buyers, young working couples, first-time or retired buyers, this is the average home buyer who is in the market to purchase a primary residence. They are buyers who have access to finance or enough money saved up to purchase a property cash. As the large majority of these buyers will require financing, an important aspect for this type of buyer will be the home's price and their level of affordability. Features that will be important to them will be proximity to their place of work and amenities such as schools, medical facilities and shopping centre's.
Buy-to-let investors
A property that can generate revenue while it appreciates in value over the long term is the main concern for this buyer. They are generally looking for a secure long-term investment that will be relatively low maintenance. Goslett says that these buyers are normally looking for sectional title units that require little or no renovation and can be rented out immediately to start earning income. In some cases they are also looking for larger homes that can be rented to upmarket tenants or students in a commune set-up.
Fix-and-flip investors
Fix-and-flip investors are normally full-time property investors looking for properties that are selling substantially below the market norm in a specific area. This type of investor will be looking for a property in need of renovation that they can restore and sell in a reasonably short period of time for a return on investment.
Hybrid buyers
According to Goslett, these buyers are not full-time property investors but they have 100% cash or a large deposit and good credit records. These buyers normally wait for the property market to fall or for a really good deal to come along before they make an investment. They generally prefer properties that don't require renovations and can be leased out as soon as possible.
Goslett says that although it is important for sellers to know the type of buyer they are dealing with, it is equally important that the seller is serious about selling their home and is open to negotiation. "With the market currently favouring buyers, sellers will need to be willing to negotiate. If a seller is merely putting their property on the market to see what they can get and they are not willing to budge on their asking price, it will be very difficult for them to sell their home, especially if their price is not market related," he says.
"A successful sales transaction occurs when the criteria of a buyer is matched by a property on sale from a serious seller. An experienced agent from a reputable real estate company can help to connect the right buyer with the right property and facilitate the sales process to ensure it is a hassle free experience," Goslett concludes.
2013: THE YEAR OF TRANSFORMATION
Adrian Goslett, CEO of RE/MAX of Southern Africa, looks at the property sector moving forward in the era of transformation during 2013.
Despite the prevailing challenging economic circumstances experienced in the property market, 2012 has been a good year for RE/MAX of Southern Africa, says Adrian Goslett, CEO of RE/MAX of Southern Africa. He points out that during 2012 RE/MAX of Southern Africa has seen a marked increase in the number of property sales achieved per agent.
"During the first half of this year RE/MAX of Southern Africa saw a 12% increase in sales when compared to the same period of 2011. In addition, more than 25 new franchises opened in the Southern African region - which includes South Africa, Namibia, Botswana, Swaziland, Lesotho, Mozambique, Zimbabwe, Zambia, Angola, Mauritius and the Seychelles - up to the end of October 2012. The brand is continuing to grow its footprint that encompasses 170 office locations and over 1800 experienced estate agents," he says.
Locally RE/MAX agents account for approximately 6% of total agent numbers and for approximately 15% of all sales transactions. "The average number of years of real estate experience within the RE/MAX of Southern Africa group is over 10 years, and our average agent commission earnings up 31% in 2012, compared to the 2010 figures," says Goslett.
He notes that much like last year, 2012 can be called a success for RE/MAX of Southern Africa and its agents and it is expected that the company will continue to flout industry norms in 2013.
So what factors will influence the property market and those within the industry moving forward into 2013 the most? Goslett looks at a few elements that will influence the trading environment that property professionals find themselves in:
Access to finance:
Over the past year the rand value of the gross debtors' book for mortgages has shown an increase as has the number of applicants applying for bond finance. Goslett says that this is due to the fact that South Africa's financial institutions have marginally relaxed their lending criteria to the point where close on 51% of all home loan applications are approved.
Goslett points out that high debt-to-income ratios and a poor savings culture are the major reasons why many South African homebuyers have struggled to obtain finance. South Africa only has a domestic savings rate of around 20% of GDP, compared to other emerging markets like China which has a domestic savings rate of around 50% of GDP. "High debt and poor savings reflect negatively on affordability levels, which has held back the market and slowed down recovery. For this to change in 2013, South African consumers will need to focus on clearing their debt and starting a savings programme to ensure their ability to secure home loan finance in the future," said Goslett.
He adds that due to the limited access to finance, the rental market will continue to grow rapidly, which will assist investors who have a buy-to-let portfolio.
Deposits required:
While financial institutions will continue to have a greater appetite for risk, 100% bonds will still be few and far between in 2013. Statistics suggest that over the last 12 months only four out of every 10 bonds granted are for 100% of the purchase price. This means that six out of every 10 successful applicants have had to pay deposits to secure a property. The average deposit requirement for repeat buyers has risen to around 20% of the home's purchase price, in other words, buyers are required to have a fifth of the purchase price in cash. For the first-time buyers, who account for approximately 35% to 40% of the home loans granted each month, the average deposit required is around 12% of the purchase price.
Transformation in the industry:
A few years ago estate agent training and qualification were at the forefront of the industry and there was a stronger focus on the professionalism of the industry players with many agents achieving the necessary NQF levels required. Once again, 2013 will see the property industry transform, this time in the form of a revamped Estate Agency Affairs Board (EAAB). Goslett says that Tokyo Sexwale and the Department of Human Settlements are taking a proactive approach to resolving the issues within the industry and the EAAB with the focus on professionalism and transparency.
One of the goals of the EAAB will be to ensure that the property industry is more representative of all races and genders, with an emphasis on attracting the youth into the industry. The number of estate agents in South Africa has dropped from 80 000 in 2008 to approximately half that figure or less as a result of the global economic recession.
Goslett notes that real estate businesses that promote and encourage transformation will continue to thrive and gain support across the South African market spectrum. RE/MAX of Southern Africa has, for a number of years, been highly rated as a BBBEE organization.
Technology:
With the constant evolution of technological advancement, technology will continue to play a vital role in the property industry in terms of marketing strategy and interaction between real estate professionals and their clients. The trend of searching for property online will continue to gain momentum and more and more buyers will find their dream home through online property search portals.
Fair market value:
In 2013, property pricing and the perceived value of property will continue to be an important factor to the success of a sale. Statistically, if a property is priced correctly it will be sold within the first four weeks of being on the market and generally it will sell at the asking price. "Although sellers are the ones that set their asking price, property pricing within a certain market is largely determined by what a buyer is willing to pay for that property," says Goslett.
According to ABSA, the first ten months of 2012 saw house prices marginally down by around 0.6% year-on-year, while the FNB house price index revealed a house price growth rate of around 6.6% in August this year. The index's average price of homes transacted was R865 900. Goslett says that although house price growth has subsequently improved slightly, RE/MAX expects that trading conditions and the house price growth will remain relatively low during 2013 and follow a similar path to what we have seen during 2012.
"With property market activity and constantly increasing, so much so that certain areas are reporting stock shortages of certain types of property, 2013 is bond to a year of change with transformation coming to the fore of the property sector," Goslett concludes.
Despite the prevailing challenging economic circumstances experienced in the property market, 2012 has been a good year for RE/MAX of Southern Africa, says Adrian Goslett, CEO of RE/MAX of Southern Africa. He points out that during 2012 RE/MAX of Southern Africa has seen a marked increase in the number of property sales achieved per agent.
"During the first half of this year RE/MAX of Southern Africa saw a 12% increase in sales when compared to the same period of 2011. In addition, more than 25 new franchises opened in the Southern African region - which includes South Africa, Namibia, Botswana, Swaziland, Lesotho, Mozambique, Zimbabwe, Zambia, Angola, Mauritius and the Seychelles - up to the end of October 2012. The brand is continuing to grow its footprint that encompasses 170 office locations and over 1800 experienced estate agents," he says.
Locally RE/MAX agents account for approximately 6% of total agent numbers and for approximately 15% of all sales transactions. "The average number of years of real estate experience within the RE/MAX of Southern Africa group is over 10 years, and our average agent commission earnings up 31% in 2012, compared to the 2010 figures," says Goslett.
He notes that much like last year, 2012 can be called a success for RE/MAX of Southern Africa and its agents and it is expected that the company will continue to flout industry norms in 2013.
So what factors will influence the property market and those within the industry moving forward into 2013 the most? Goslett looks at a few elements that will influence the trading environment that property professionals find themselves in:
Access to finance:
Over the past year the rand value of the gross debtors' book for mortgages has shown an increase as has the number of applicants applying for bond finance. Goslett says that this is due to the fact that South Africa's financial institutions have marginally relaxed their lending criteria to the point where close on 51% of all home loan applications are approved.
Goslett points out that high debt-to-income ratios and a poor savings culture are the major reasons why many South African homebuyers have struggled to obtain finance. South Africa only has a domestic savings rate of around 20% of GDP, compared to other emerging markets like China which has a domestic savings rate of around 50% of GDP. "High debt and poor savings reflect negatively on affordability levels, which has held back the market and slowed down recovery. For this to change in 2013, South African consumers will need to focus on clearing their debt and starting a savings programme to ensure their ability to secure home loan finance in the future," said Goslett.
He adds that due to the limited access to finance, the rental market will continue to grow rapidly, which will assist investors who have a buy-to-let portfolio.
Deposits required:
While financial institutions will continue to have a greater appetite for risk, 100% bonds will still be few and far between in 2013. Statistics suggest that over the last 12 months only four out of every 10 bonds granted are for 100% of the purchase price. This means that six out of every 10 successful applicants have had to pay deposits to secure a property. The average deposit requirement for repeat buyers has risen to around 20% of the home's purchase price, in other words, buyers are required to have a fifth of the purchase price in cash. For the first-time buyers, who account for approximately 35% to 40% of the home loans granted each month, the average deposit required is around 12% of the purchase price.
Transformation in the industry:
A few years ago estate agent training and qualification were at the forefront of the industry and there was a stronger focus on the professionalism of the industry players with many agents achieving the necessary NQF levels required. Once again, 2013 will see the property industry transform, this time in the form of a revamped Estate Agency Affairs Board (EAAB). Goslett says that Tokyo Sexwale and the Department of Human Settlements are taking a proactive approach to resolving the issues within the industry and the EAAB with the focus on professionalism and transparency.
One of the goals of the EAAB will be to ensure that the property industry is more representative of all races and genders, with an emphasis on attracting the youth into the industry. The number of estate agents in South Africa has dropped from 80 000 in 2008 to approximately half that figure or less as a result of the global economic recession.
Goslett notes that real estate businesses that promote and encourage transformation will continue to thrive and gain support across the South African market spectrum. RE/MAX of Southern Africa has, for a number of years, been highly rated as a BBBEE organization.
Technology:
With the constant evolution of technological advancement, technology will continue to play a vital role in the property industry in terms of marketing strategy and interaction between real estate professionals and their clients. The trend of searching for property online will continue to gain momentum and more and more buyers will find their dream home through online property search portals.
Fair market value:
In 2013, property pricing and the perceived value of property will continue to be an important factor to the success of a sale. Statistically, if a property is priced correctly it will be sold within the first four weeks of being on the market and generally it will sell at the asking price. "Although sellers are the ones that set their asking price, property pricing within a certain market is largely determined by what a buyer is willing to pay for that property," says Goslett.
According to ABSA, the first ten months of 2012 saw house prices marginally down by around 0.6% year-on-year, while the FNB house price index revealed a house price growth rate of around 6.6% in August this year. The index's average price of homes transacted was R865 900. Goslett says that although house price growth has subsequently improved slightly, RE/MAX expects that trading conditions and the house price growth will remain relatively low during 2013 and follow a similar path to what we have seen during 2012.
"With property market activity and constantly increasing, so much so that certain areas are reporting stock shortages of certain types of property, 2013 is bond to a year of change with transformation coming to the fore of the property sector," Goslett concludes.
Wednesday 28 November 2012
Hello From Plett
Unbelievable
as it may seem, we have come to the end of another year. January seems to have
been only a month or two ago.
At this time
of the year, Plett is abuzz with anticipation. The Matrics arrive at the end of
November, full of joie de vivre and ready to party, in celebration of the end
of their school careers. They are loud and happy and kick our Summer Season off
with a bang.
We are happy
to report an increase in the number of sales this year. Buyers seem to have
realized that if they don’t take advantage of the lower prices, in the hope
that they are still going to drop further, they will miss the boat and will really
regret the lost opportunity. Sellers, too, seem to have begun to heed Estate
Agents who have been telling them that buyers have a large selection of
properties to choose from, and that if their home is not priced correctly,
their chances of selling are greatly reduced.
Plett has
shaken off the winter blues, after a particularly grueling and cold winter, and
we are all basking in the most glorious sunshine. Our town is looking great
with shopkeepers receiving their holiday stock, gardens being spruced up, and
new homes being completed.
We are
gearing up for local elections early in December. The results are important for
all of us and it is critical that we all get behind our chosen candidates, to
address issues which require attention.
As the
school year winds up and businesses close for the year, we welcome our
visitors, old and new, regular and first time Plett holiday makers. We wish you
all a wonderful holiday, a welcome break from work and a peaceful Festive
season with family and good friends. Tread lightly on our beautiful town.
Re-energize and leave with wonderful new memories.
Wednesday 21 November 2012
A Fast Track To Savings
Homeowners on a tight budget can still pay off their bond faster. A small increase on a homeowner's monthly bond repayment can make a big difference in the quantity of time it takes to pay it off, said Adrian Goslett, CEO of RE/MAX of Southern Africa.
For example, on a 20-year bond of R500 000 at an interest of 11%, the monthly bond repayment will be in the region of R5 160. If the homeowner pays just R300 extra into their bond every month, they will save over R144 000 and cut the term of their bond by almost four years, said Goslett.
"This may be just a small step, but it can fast track a homeowner's path to financial freedom," Goslett said. If a homeowner is financially stretched to the limit and cannot afford to pay additional money into their bond, they could rather focus on finding ways to reduce the payable interest. He notes that on a bond of R1-million, a reduction of as little as 0,5% on the interest rate can result in a saving of over R76 000 for a 20-year home loan.
In some cases switching from one financial institution to another could reduce the interest rate. "Keep in mind, homeowners that do consider this option could face paying bond cancellation and penalty fees, which will severely reduce any benefit or profit achieved from obtaining the lower rate," Goslett warned.
According to Goslett, if a homeowner does obtain a lower interest rate through switching banks or a general interest rate cut, they should still keep their monthly repayments at the same amount. Banks will usually automatically reduce monthly payments according to the prime interest rates fluctuation. Homeowners can, however, have the repayment stabilised. Maintaining the original bond repayment at the reduced interest rate will mean that they are getting the benefit of paying extra into their home loan every month, without having to find additional money in the budget.
Homeowners can make further savings on their home loan interest if they have an access bond where they can transfer extra lump sums of money into the loan account Goslett said. The interest rate payable on the home loan account is calculated daily based on the outstanding balance. This means that if a homeowner has access to the home loan account and is able to transfer cash into the account when they have it, they can reduce the amount of daily interest charged for the period that the money is in the account. Even if the money is only in the account for a short while until the homeowner requires it and needs to withdraw it again, the interest over that period will still be less. "The savings on the daily interest amount might seem small, but it will add up over the term of the loan," added Goslett.
For example, on a 20-year bond of R500 000 at an interest of 11%, the monthly bond repayment will be in the region of R5 160. If the homeowner pays just R300 extra into their bond every month, they will save over R144 000 and cut the term of their bond by almost four years, said Goslett.
"This may be just a small step, but it can fast track a homeowner's path to financial freedom," Goslett said. If a homeowner is financially stretched to the limit and cannot afford to pay additional money into their bond, they could rather focus on finding ways to reduce the payable interest. He notes that on a bond of R1-million, a reduction of as little as 0,5% on the interest rate can result in a saving of over R76 000 for a 20-year home loan.
In some cases switching from one financial institution to another could reduce the interest rate. "Keep in mind, homeowners that do consider this option could face paying bond cancellation and penalty fees, which will severely reduce any benefit or profit achieved from obtaining the lower rate," Goslett warned.
According to Goslett, if a homeowner does obtain a lower interest rate through switching banks or a general interest rate cut, they should still keep their monthly repayments at the same amount. Banks will usually automatically reduce monthly payments according to the prime interest rates fluctuation. Homeowners can, however, have the repayment stabilised. Maintaining the original bond repayment at the reduced interest rate will mean that they are getting the benefit of paying extra into their home loan every month, without having to find additional money in the budget.
Homeowners can make further savings on their home loan interest if they have an access bond where they can transfer extra lump sums of money into the loan account Goslett said. The interest rate payable on the home loan account is calculated daily based on the outstanding balance. This means that if a homeowner has access to the home loan account and is able to transfer cash into the account when they have it, they can reduce the amount of daily interest charged for the period that the money is in the account. Even if the money is only in the account for a short while until the homeowner requires it and needs to withdraw it again, the interest over that period will still be less. "The savings on the daily interest amount might seem small, but it will add up over the term of the loan," added Goslett.
Tips to Maximise Your Home's Profit Potential
For most people buying a home will be the largest financial investment they will ever make. It is possibly going to be their greatest return on investment over the long term. It is also perhaps one of the few investments that the owner can enjoy and make use of while it appreciates in value. For these reasons it is important for homeowners to put a lot of time and consideration into the inevitable possibility that they will one day sell their home, says Adrian Goslett, CEO of RE/MAX of Southern Africa. "While it does happen, very few buyers will purchase a home and stay in that same property for the rest of their lives. Although property is a long-term investment, a buyer should always buy a home with the consideration that in reality they will eventually sell it. What ever the time frame, the process of buying and selling should remain the same, with the primary objective being to maximise the return on the investment at the realisation of the sale," says Mr. Goslett.
He says that in the current market, sellers who want to achieve the highest possible return on their investment will need to follow a certain formula that combines three main elements. These elements include fair market value, an excellent marketing plan and a well presented and prepared home. The important of a home that is priced within the correct bracket cannot be overstated, says Mr. Goslett.
Many sellers make the mistake of overpricing their property to give them room to negotiate with prospective buyers. While this may have worked during the boom period, it does not work in a recovering market that favours buyers. Overpricing will merely chase potential buyers away. Statistically speaking, property sold within the first month of being on the market will sell for the seller's asking price, provided the home is marketed a fair market value. Thereafter the chance of the property being sold for the initial asking price becomes progressively less likely, with statistics indicating that houses that have been on the market for 24 weeks or more sold for as much as 10% less than the original asking price.
Homeowners must also ensure that their home is well maintained and cared for while they live there so that when they decide to sell, the home is ready and looking its best without needing costly upgrades just before sale. Mr. Goslett says that homeowners who keep their home updated and organised throughout the years will improve the way they live in their homes and ultimately add to the home's value.
He says that in the current market, sellers who want to achieve the highest possible return on their investment will need to follow a certain formula that combines three main elements. These elements include fair market value, an excellent marketing plan and a well presented and prepared home. The important of a home that is priced within the correct bracket cannot be overstated, says Mr. Goslett.
Many sellers make the mistake of overpricing their property to give them room to negotiate with prospective buyers. While this may have worked during the boom period, it does not work in a recovering market that favours buyers. Overpricing will merely chase potential buyers away. Statistically speaking, property sold within the first month of being on the market will sell for the seller's asking price, provided the home is marketed a fair market value. Thereafter the chance of the property being sold for the initial asking price becomes progressively less likely, with statistics indicating that houses that have been on the market for 24 weeks or more sold for as much as 10% less than the original asking price.
Homeowners must also ensure that their home is well maintained and cared for while they live there so that when they decide to sell, the home is ready and looking its best without needing costly upgrades just before sale. Mr. Goslett says that homeowners who keep their home updated and organised throughout the years will improve the way they live in their homes and ultimately add to the home's value.
'TWO ROOMS THAT HELP SELL A HOME
ARE THE KITCHEN AND BATHROOM'
"First impressions and aesthetic appeal are important when it comes to a property's resale value." The outside of the property will be just as important as the inside, so sellers should make sure that their home has curb appeal by maintaining their lawn and landscaping. A newly painted home will have a fresh look that will add to the value and interest of the property. Always keep paint colours neutral and current," he says.
"Two rooms in particular that help sell a home are the kitchen and bathroom. They do not necessarily have to be high-end or luxurious. Just updated, clean and well designed enough. The investment made in these areas of the home can definitely translate into the difference between a speedy and profitable sale, as opposed to a listing that languishes on the market."
In closing, Mr. Goslett says that if a seller follows these guidelines, they will have the best possible chance of realising their home's resale potential. "Property remains a sold asset class that continues to perform well over the longer term. "However, homeowners do have to play their part to ensure that that property reaches its full potential," he says.
Tuesday 13 November 2012
Safety First
For many home buyers in South Africa, security has become the number one priority when deciding to purchase a home.
South African home buyers are among the most security conscious people in the world due to the fact that so many have been affected by crime in some way. This is why property within secure estates and property with state-of-the-art security systems are generally sought-after and have a greater return on investment. Homeowners can add value to their homes by upgrading their security, as well as have the peace of mind of knowing that the occupants in their home are safer.
Following a survey conducted with various security companies below are a few ways homeowners can increase the security of their homes and deter criminals:
Physical protection is best
Physical protection and barriers such as palisade-style fencing or good quality electric fencing have no match when it comes to deterring would-be burglars. It is important to remember that an electric fence around the perimeter makes the front gate the weak spot, so it is advisable that the gate is alarmed as well. Motion beams or outdoor passives are a great backup to good physical security. They provide early detection and an alarm should the physical barriers fail.
Don't be an easy target
The longer it takes to break into your home, the less likely it is that this will happen. Avoid anything that can make your home an easier target. Keep bushes and foliage trimmed back so that there are no hiding places for intruders and keep entrance areas well lit. Be careful not to leave garage doors unlocked or open to advertise the contents stored within. Get a guard-dog that has been trained to bark at any disturbance and talk to the children about the importance of identifying who is trying to gain access to the home.
Don't ignore the intercom
If gate buzzer or intercom rings at any hour of the day or night - do not ignore it. Some criminals use this as a method to check whether occupants of the property are home. If it is ignored, an armed intruder make take that as an invitation to proceed to enter. If the intercom does not work, remove or repair it as soon as possible.
Never advertise being away
Most criminals want to avoid a confrontational situation so they would rather break into a home while the occupants are not there. Signs such as uncollected post can make the property more vulnerable to burglary. Homeowners who don't already have timers should consider installing ones for the lights both inside and outside the home and leave a car where it is safe but visible from the outside.
Don't keep keys in usual places
A new trend among certain syndicates of housekeepers is to take your vehicle in addition to your household belongings. To combat this, keys and their spares should be kept out of all the usual places. Keeping them on key hooks and on counters and desks is a no-no. Homeowners who are going away on holiday need to make sure that keys are hidden safely away.
Be involved
Join your local community policing forum and get fellow residents together to form a neighbourhood watch with shared time schedules.
Although their is no fool-proof way of ensuring that your home and occupants will be protected at all times, being prepared and taking the necessary precautions is a step in the right direction.
Fine Print In An Offer To Purchase
The offer to purchase a house could be the most important document you ever sign. It will set out everything from when the property ownership should change hands to exactly what will be included in the deal, whether it's a couch or a cat.
Carol Reynolds, area principal for Durban North and La Lucia for Pam Golding Properties, said an offer to purchase must include who the seller and buyer are, a description of the property and the price that has been agreed, including any commissions. It should be stipulated how the buyer plans to finance the purchase - a bond or cash - when occupation will take place, and occupational rental, if any. This is usually 0.5% of the purchase price a month.
Once the dates are settled, other key clauses include the voetstoots clause, the breach clause, and the obligations of the buyer and seller. The seller's obligations include ensuring that the building plans have been passed, and getting beetle, electrical and gas compliance certificates. The buyer's obligations are to comply with the time periods stipulated for payment and to ensure that there are no unnecessary delays. Buyers need to pay transfer costs before title deeds change hands. These costs are in addition to the purchase price. "First-time buyers are often unaware that they need to pay these costs prior to transfer and they cannot rely on their bond to pay for them," said Reynolds.
If the buyer has to get a bond approved, there should be a clause in the offer to make the entire agreement conditional on getting a bond. "The sale becomes conclusive immediately upon the bank issuing a final grant quotation, regardless of whether the buyer is happy with the interest rate involved or not. The buyer cannot cancel the sale on the grounds that the terms of the bond grant are not acceptable to him or her," Reynolds warned. Often buyers will need to sell their property first. "Offers tath are conditional upon the buyer selling a property are not conclusive until the buyer has secured an unconditional sale on their property. All bond and other conditions in the purchaser's sale need to be met in order for the second sale to be fulfilled," Reynolds said.
This may mean the seller remains open to offers from other potential buyers. If they get another offer, the first buyer can be put on notice and given a week or two to either sell their house or waive the condition. It is better for buyers to try to sell their homes before house-hunting so they can "offer a clean deal to the seller," said Reynolds.
The clause pertaining to fixtures and fitting can often be highly contentious. Sellers should specify exactly which fittings are to be excluded from the sale. "If all aspects of the sale have been covered and written into the document, there will be very little room for either the buyer or seller to negate anything at a later stage. For example, certain curtains or furniture may have been specifically manufactured for that particular home, so it would make sense for the seller to include those items. "As a general rule, anything that is nailed, glued or screwed down stays and everything else can go," said Adrian Goslett, CEO of RE/MAX Southern Africa.
The most contentious clause is the voetstoots clause. "This clause menas that the purchaser buys the property 'as is' in its current condition as a 'second-hand' property, thereby protecting the seller fro mpatent and latent defects," Reynolds said. But sellers cannot rely on this clause to protect against defects that are known to them and which they are hoping may be overlooked by the purchaser.
Sellers have to disclose all known defects. If they try to conceal these defects, the purchaser will have a claim against the seller for fraudulent non-disclosure, Reynolds said. The seller must inform the estate agent of any defects before the agent begins to market the property. A critical final consideration is to ensure that the correct and authorised signatories have signed the agreement. "If the parties are married in community of property, then both spouses need to sign," said Reynolds.
Carol Reynolds, area principal for Durban North and La Lucia for Pam Golding Properties, said an offer to purchase must include who the seller and buyer are, a description of the property and the price that has been agreed, including any commissions. It should be stipulated how the buyer plans to finance the purchase - a bond or cash - when occupation will take place, and occupational rental, if any. This is usually 0.5% of the purchase price a month.
Once the dates are settled, other key clauses include the voetstoots clause, the breach clause, and the obligations of the buyer and seller. The seller's obligations include ensuring that the building plans have been passed, and getting beetle, electrical and gas compliance certificates. The buyer's obligations are to comply with the time periods stipulated for payment and to ensure that there are no unnecessary delays. Buyers need to pay transfer costs before title deeds change hands. These costs are in addition to the purchase price. "First-time buyers are often unaware that they need to pay these costs prior to transfer and they cannot rely on their bond to pay for them," said Reynolds.
If the buyer has to get a bond approved, there should be a clause in the offer to make the entire agreement conditional on getting a bond. "The sale becomes conclusive immediately upon the bank issuing a final grant quotation, regardless of whether the buyer is happy with the interest rate involved or not. The buyer cannot cancel the sale on the grounds that the terms of the bond grant are not acceptable to him or her," Reynolds warned. Often buyers will need to sell their property first. "Offers tath are conditional upon the buyer selling a property are not conclusive until the buyer has secured an unconditional sale on their property. All bond and other conditions in the purchaser's sale need to be met in order for the second sale to be fulfilled," Reynolds said.
This may mean the seller remains open to offers from other potential buyers. If they get another offer, the first buyer can be put on notice and given a week or two to either sell their house or waive the condition. It is better for buyers to try to sell their homes before house-hunting so they can "offer a clean deal to the seller," said Reynolds.
The clause pertaining to fixtures and fitting can often be highly contentious. Sellers should specify exactly which fittings are to be excluded from the sale. "If all aspects of the sale have been covered and written into the document, there will be very little room for either the buyer or seller to negate anything at a later stage. For example, certain curtains or furniture may have been specifically manufactured for that particular home, so it would make sense for the seller to include those items. "As a general rule, anything that is nailed, glued or screwed down stays and everything else can go," said Adrian Goslett, CEO of RE/MAX Southern Africa.
The most contentious clause is the voetstoots clause. "This clause menas that the purchaser buys the property 'as is' in its current condition as a 'second-hand' property, thereby protecting the seller fro mpatent and latent defects," Reynolds said. But sellers cannot rely on this clause to protect against defects that are known to them and which they are hoping may be overlooked by the purchaser.
Sellers have to disclose all known defects. If they try to conceal these defects, the purchaser will have a claim against the seller for fraudulent non-disclosure, Reynolds said. The seller must inform the estate agent of any defects before the agent begins to market the property. A critical final consideration is to ensure that the correct and authorised signatories have signed the agreement. "If the parties are married in community of property, then both spouses need to sign," said Reynolds.
USEFUL TIPS FOR BUYERS FROM ADRIAN GOSLETT - RE/MAX OF SOUTHERN AFRICA
- BE absolutely happy before you conclude the offer. Once it has been signed and accepted by the seller you will be contractually obligated to that transaction. Read each section carefully and make sure you fully understand what the document is saying. If you are unsure of any clause in the document, ask your agent to clarify it. You could even get a lawyer to read it and give advice where necessary; and
- Once the document has been signed, all negotiations have been concluded and any relevant cooling-off period has passed, your deposit should be placed into an interest-bearing account until transfer of ownership is complete. The interest on this account will be for the benefit of you, the buyer, when it is released once the sale goes through.
Pull Up Your Credit Socks Before Trying To Apply For A Bond
FINANCIAL institutions have relaxed their lending criteria to some degree and have shown a greater appetite for risk this year, with the percentage of bond approvals growing monthly.
However, homeowners will still face relatively strict lending standards compared with the boom period - now and in the foreseeable future, says Adrian Goslett, chief executive of RE/MAX of Southern Africa. He says buyers who want to improve their chances of bond approval will need to work on their credit fitness and improve their credit rating score. "Banks generally look at how a prospective homebuyers has conducted their account over the past six months... It is important that during this period no late payments have been made as this will negatively affect the applicant's credit assessment," says Goslett.
It is for this reason that he says if there are any unjust negatives on the homebuyer's account or credit score, they should query them and have them rectified. "Consumers are able to obtain a free annual credit report from each of the respective credit bureaus, which they should do to stay informed about their credit rating," he says.
"Firstly it will give them their credit score and an idea of where they stand, and secondly it will allow them to see if the information provided to the credit bureau is correct. "Potential homebuyers should lodge an objection against incorrect information such as late payments, collections that are not theirs or any items that have been paid on time and in full and do not reflect as such. "It is important that the home buyer focuses on correcting the larger and more recent issues first. if the buyer has a judgment against their name and the five-year data retention period has lapsed, they should have it rescinded as soon as possible because a judgment has a higher weighting than any other negative listing, and removing it will increase their credit rating."
According to Goslett, the law states that consumers are entitled to the credit they can afford. This means that if the homebuyer has any existing credit facility they are not using, such as clothing store cards, it will be taken into account when the financial institution is determining affordability. He advises that where possible, these unused accounts should be closed.
"The fewer different credit facilities you have the better. However, this does not mean that homebuyers should consolidate all their credit but rather aim to reduce lines of credit, as the fewer they have the better. "Credit cards and other forms of revolving credit could also reflect badly on a potential homebuyer because it indicates that they are in need of credit regularly. If it is not possible to close these accounts, then it is important that they are managed correctly."
Goslett notes that paying down revolving credit is generally more beneficial than paying down other types of loans. He says cards close to their limits should be paid down first to ensure a speedier credit improvement due to the gap widening between the limit and the balance on the card. As a rule of thumb, always leave a 30 percent or higher gap between what you owe and the card's limit - lenders will look for this minimum gap.
"If a homebuyer is applying for finance with their spouse or someone else who is standing as security, they should also ensure they have a favourable credit record as this will affect the approval process and have a bearing on the good impression the homebuyer is trying to create," advises Goslett. "It is vital that homebuyers take steps to ensure their credit record is in good standing to gain lender approval, especially if they are only months away from a purchase."
However, homeowners will still face relatively strict lending standards compared with the boom period - now and in the foreseeable future, says Adrian Goslett, chief executive of RE/MAX of Southern Africa. He says buyers who want to improve their chances of bond approval will need to work on their credit fitness and improve their credit rating score. "Banks generally look at how a prospective homebuyers has conducted their account over the past six months... It is important that during this period no late payments have been made as this will negatively affect the applicant's credit assessment," says Goslett.
It is for this reason that he says if there are any unjust negatives on the homebuyer's account or credit score, they should query them and have them rectified. "Consumers are able to obtain a free annual credit report from each of the respective credit bureaus, which they should do to stay informed about their credit rating," he says.
"Firstly it will give them their credit score and an idea of where they stand, and secondly it will allow them to see if the information provided to the credit bureau is correct. "Potential homebuyers should lodge an objection against incorrect information such as late payments, collections that are not theirs or any items that have been paid on time and in full and do not reflect as such. "It is important that the home buyer focuses on correcting the larger and more recent issues first. if the buyer has a judgment against their name and the five-year data retention period has lapsed, they should have it rescinded as soon as possible because a judgment has a higher weighting than any other negative listing, and removing it will increase their credit rating."
According to Goslett, the law states that consumers are entitled to the credit they can afford. This means that if the homebuyer has any existing credit facility they are not using, such as clothing store cards, it will be taken into account when the financial institution is determining affordability. He advises that where possible, these unused accounts should be closed.
"The fewer different credit facilities you have the better. However, this does not mean that homebuyers should consolidate all their credit but rather aim to reduce lines of credit, as the fewer they have the better. "Credit cards and other forms of revolving credit could also reflect badly on a potential homebuyer because it indicates that they are in need of credit regularly. If it is not possible to close these accounts, then it is important that they are managed correctly."
Goslett notes that paying down revolving credit is generally more beneficial than paying down other types of loans. He says cards close to their limits should be paid down first to ensure a speedier credit improvement due to the gap widening between the limit and the balance on the card. As a rule of thumb, always leave a 30 percent or higher gap between what you owe and the card's limit - lenders will look for this minimum gap.
"If a homebuyer is applying for finance with their spouse or someone else who is standing as security, they should also ensure they have a favourable credit record as this will affect the approval process and have a bearing on the good impression the homebuyer is trying to create," advises Goslett. "It is vital that homebuyers take steps to ensure their credit record is in good standing to gain lender approval, especially if they are only months away from a purchase."
Depressed Property Market Good For Investors
Many of the world's key cities report strong residential property growth this year, although some markets remain under pressure due to the general flat economic climate. Overall, home prices declined year-on-year in 2012 in the majority of international markets. Depressed market conditions have, however, opened up major opportunities for savvy global property investors.
That is according to Vinnie Tracey, president of RE/MAX LLC, based in Denver, Colorado, America. Tracey said that even though the American housing market hit bottom at the beginning of this year, for several months now, home sales and prices have been continuing to rise higher than the levels seen in 2011. "It won't be a perfect 'V' shaped recovery, but the worst is behind us and, barring unexpected economic news, we should do better in 2012 than 2011. We expect that 2013 will be even better."
Peter Gilmour, chairman of RE/MAX Southern Africa, says further recovery of the South African market has taken place this year. "While challenging conditions have prevailed during the first half of 2012, RE/MAX of Southern Africa has seen a marked increase in the number of property sales achieved per agent." RE/MAX Southern Africa reported a 12% increase on registered sales in the first half of 2012 compared to the first half of 2011, which far outstrips the national average of less than 5%. Looking to Europe, which has possibly felt some of the worst effects of the global recession on property, Tracey notes that most of Europe has experienced fairly stable housing market, but economic problems have created troubled markets in places like Greece, Italy, Spain and Portugal. "It will take longer for these locations to recover, with their housing prices still falling by double digit percentages. RE/MAX has just entered the Chinese market and we see a great future there," said Tracey. "The market has experienced a recent boom and is now correcting a bit, but foreign investment continues to be substantial."
The new RE/MAX franchise rights for China which include the Mainland, Hong Kong and Macau, have raised the overall RE/MAX country count to more than 85 - a larger global footprint than any other international franchise real estate company. Looking at the new market trends emerging in America and globally in the aftermath of the recession, Tracey says that although lending standards have remained very strict in America, mortgage rates are at historic lows, and investors and foreign buyers have stepped in to help the recovery. "Many are paying in cash, which is somewhat unique for the America market," he says. "In many cities, there is now a shortage of inventory, and if not corrected, could lead to lower sales in future months."
Gilmour says South Africa is trading under similar conditions with a marked increase in activity in the property market due to a stronger demand from buyers and the fact that financial institutions have a greater appetite for risk.
The drop in interest rates to a 39-year low has also had a positive effect. "The increased demand for property during 2012, as more buyers are able to meet the criteria required for bond approval, means that while there are still opportunities in the market in general, some regions have reported a shortage of certain types of properties that are available."
Tracey notes that distressed property sales in America remain between a third and half of all sales, while higher priced home sales are still a bit slow. "As the market recovers and lending loosens, upper-end homes will start to sell and median prices will rise accordingly."
Similarly in South Africa, Gilmour says that while distressed properties are not expected to hit the 50% mark, the number of distressed homeowners will more than likely increase during 2012. "Times have been tough, and they are bound to get tougher yet," says Gilmour. "Homeowners will continue to struggle to meet their financial requirements, and more homes are due to come onto the distressed property market this year as a result."
He believes that the distressed property situation will correct rapidly from the beginning of 2013, assisted by steady price increases in the lower price ranges and a resolve from homeowners to reduce their levels of debt.
The South African property market should remain on its current path of consistent improvement over the next 12 to 18 months, however, factors such as the high household debt-to-disposable-income ratio coupled with the fact that South Africans have a poor savings culture are holding the market back.
That is according to Vinnie Tracey, president of RE/MAX LLC, based in Denver, Colorado, America. Tracey said that even though the American housing market hit bottom at the beginning of this year, for several months now, home sales and prices have been continuing to rise higher than the levels seen in 2011. "It won't be a perfect 'V' shaped recovery, but the worst is behind us and, barring unexpected economic news, we should do better in 2012 than 2011. We expect that 2013 will be even better."
Peter Gilmour, chairman of RE/MAX Southern Africa, says further recovery of the South African market has taken place this year. "While challenging conditions have prevailed during the first half of 2012, RE/MAX of Southern Africa has seen a marked increase in the number of property sales achieved per agent." RE/MAX Southern Africa reported a 12% increase on registered sales in the first half of 2012 compared to the first half of 2011, which far outstrips the national average of less than 5%. Looking to Europe, which has possibly felt some of the worst effects of the global recession on property, Tracey notes that most of Europe has experienced fairly stable housing market, but economic problems have created troubled markets in places like Greece, Italy, Spain and Portugal. "It will take longer for these locations to recover, with their housing prices still falling by double digit percentages. RE/MAX has just entered the Chinese market and we see a great future there," said Tracey. "The market has experienced a recent boom and is now correcting a bit, but foreign investment continues to be substantial."
The new RE/MAX franchise rights for China which include the Mainland, Hong Kong and Macau, have raised the overall RE/MAX country count to more than 85 - a larger global footprint than any other international franchise real estate company. Looking at the new market trends emerging in America and globally in the aftermath of the recession, Tracey says that although lending standards have remained very strict in America, mortgage rates are at historic lows, and investors and foreign buyers have stepped in to help the recovery. "Many are paying in cash, which is somewhat unique for the America market," he says. "In many cities, there is now a shortage of inventory, and if not corrected, could lead to lower sales in future months."
Gilmour says South Africa is trading under similar conditions with a marked increase in activity in the property market due to a stronger demand from buyers and the fact that financial institutions have a greater appetite for risk.
The drop in interest rates to a 39-year low has also had a positive effect. "The increased demand for property during 2012, as more buyers are able to meet the criteria required for bond approval, means that while there are still opportunities in the market in general, some regions have reported a shortage of certain types of properties that are available."
Tracey notes that distressed property sales in America remain between a third and half of all sales, while higher priced home sales are still a bit slow. "As the market recovers and lending loosens, upper-end homes will start to sell and median prices will rise accordingly."
Similarly in South Africa, Gilmour says that while distressed properties are not expected to hit the 50% mark, the number of distressed homeowners will more than likely increase during 2012. "Times have been tough, and they are bound to get tougher yet," says Gilmour. "Homeowners will continue to struggle to meet their financial requirements, and more homes are due to come onto the distressed property market this year as a result."
He believes that the distressed property situation will correct rapidly from the beginning of 2013, assisted by steady price increases in the lower price ranges and a resolve from homeowners to reduce their levels of debt.
The South African property market should remain on its current path of consistent improvement over the next 12 to 18 months, however, factors such as the high household debt-to-disposable-income ratio coupled with the fact that South Africans have a poor savings culture are holding the market back.
HOT STAT: RE/MAX RANKED TOP IN REAL ESTATE
GLOBAL estate franchiser RE/MAX is the highest ranking real estate organisation in the 2012 Franchise Times Top 200. The survey is based on worldwide sales and RE/MAX has held the top position for four years in a row. In the 12th annual Top 200 survey published in the October edition of Franchise Times magazine, RE/MAX ranked 16th a month all franchises. Some of the top ranked franchises identified in the survey include McDonald's, Hertz, and Hyatt Hotels.
RE/MAX said it enjoys significant growth, adding that it recently announced that it will soon open in China. In Southern Africa, sales are up 77% compared with the previous year, said Adrian Goslett, CEO of RE/MAX, Southern Africa.
RE/MAX said it enjoys significant growth, adding that it recently announced that it will soon open in China. In Southern Africa, sales are up 77% compared with the previous year, said Adrian Goslett, CEO of RE/MAX, Southern Africa.
Wednesday 17 October 2012
Hello From Plett
Well Spring has sprung, the days are longer, and things are
warming up! Albeit slowly! The school holidays, the first week of this
month, has seen a number of visitors in town, who have enjoyed a variety of
events laid on for all to enjoy.
From cycle races, and a sponsored walk for paws, as well as
the “Heart and Sole” marathon event arranged by our local athletics club,
guaranteed to satisfy the sports fanatic in all of us.
We congratulate our local cyclist Kevin Evans who is
currently completing at World Champs in France, and wish him every success.
RE/MAX is also
very proud of our very own Bruce Noble who won the local “So You Think You Can
Cook” competition, as well as being one of two local NSRI members who were
chosen for special training in America.
Well done Bruce!
The local buzz is tangible, as business’ look forward to the
approach of the December season with enthusiasm. On the property front things remain steady
and encouraging, with sales recorded regularly, whilst prices and values remain
low, in line with the National market trends.
The general outlook is optimistic.
The RE/MAX Prime
Properties team look forward to meeting you when you next visit Plett.
Renovate With Care
Renovations can add value to a property, but only if they are done in the right way, according to Adrian Goslett, CEO of RE/MAX of Southern Africa. Goslett noted that many homeowners tend to undertake home renovations at great cost but add very little or no value to their property when they decide to sell. This is why it is important for home owners to research certain aspects before venturing down the renovation path, especially if the renovation is specifically for investment and resale purposes.
Goslett said that one of these elements is the general value of property in the area in which the home is situated. Although property prices can vary from street to street, most suburbs will have an average sale price. The homeowner can risk over-capitalising if the cost of renovation vastly outweighs the profit that can be made, if the property is sold at a later stage. Over-capitalising can actually have the opposite effect and devalue a property. Its location and condition, especially in comparison to other nearby properties, largely dictate the value of a home. This means that before they break ground, homeowners should have an idea of property value in the area and the current real estate market.
Property websites and newspapers will give the homeowner some idea of the market trends and prices, however, consulting with a real estate professional specialising in that area will give the homeowner a clearer picture of the market. An agent will know what current buyers are looking for and at what price. Different features appeal to different buyers.
Different kinds of renovations could appeal to different buyers that are attracted to the area. Knowing the particular area's general buyer profile and the features they look for, is essential to undertaking a renovation project that will add the most value. If the predominant kind of buyer in an area is a business executive wanting low maintenance and lock-up-and-go features, a swimming pool could prove to be more of a hindrance than a value adding element, while a family buyer could see this as a draw card.
Due to the fact that renovation is often an emotional decision, Goslett advised homeowners to have a set budget before starting and to try stick to it as much as possible. As a rule of thumb, the renovation cost should not be more than 25% of the estimated value of the home. "Setting a renovation budget will also require the homeowner to do some research regarding the associated costs. Certain elements may cost more than expected, so this will need to be planned for ahead of time. A lack of financial planning could result in a poorly completed or half-finished project, either of which could affect the value of the property negatively," Goslett advised.
Some homeowners may be tempted to undertake the renovations themselves to mitigate costs. However, this is generally not recommended practice unless the homeowner is qualified to do so. Badly completed DIY renovations can cost far more to rectify.
Goslett said that one of these elements is the general value of property in the area in which the home is situated. Although property prices can vary from street to street, most suburbs will have an average sale price. The homeowner can risk over-capitalising if the cost of renovation vastly outweighs the profit that can be made, if the property is sold at a later stage. Over-capitalising can actually have the opposite effect and devalue a property. Its location and condition, especially in comparison to other nearby properties, largely dictate the value of a home. This means that before they break ground, homeowners should have an idea of property value in the area and the current real estate market.
Property websites and newspapers will give the homeowner some idea of the market trends and prices, however, consulting with a real estate professional specialising in that area will give the homeowner a clearer picture of the market. An agent will know what current buyers are looking for and at what price. Different features appeal to different buyers.
Different kinds of renovations could appeal to different buyers that are attracted to the area. Knowing the particular area's general buyer profile and the features they look for, is essential to undertaking a renovation project that will add the most value. If the predominant kind of buyer in an area is a business executive wanting low maintenance and lock-up-and-go features, a swimming pool could prove to be more of a hindrance than a value adding element, while a family buyer could see this as a draw card.
Due to the fact that renovation is often an emotional decision, Goslett advised homeowners to have a set budget before starting and to try stick to it as much as possible. As a rule of thumb, the renovation cost should not be more than 25% of the estimated value of the home. "Setting a renovation budget will also require the homeowner to do some research regarding the associated costs. Certain elements may cost more than expected, so this will need to be planned for ahead of time. A lack of financial planning could result in a poorly completed or half-finished project, either of which could affect the value of the property negatively," Goslett advised.
Some homeowners may be tempted to undertake the renovations themselves to mitigate costs. However, this is generally not recommended practice unless the homeowner is qualified to do so. Badly completed DIY renovations can cost far more to rectify.
Value In Property Investment
THE CONFLICT between sound local economic news and renewed concern about the euro zone crisis, slower growth rates in China, Brazil and India and a UK recession call for a pragmatic approach to property investment. The fundamental property drivers remain price and the availability of finance, the first measured by interest rates and the second by banks' willingness to lend and the criteria attached.
Seeff regional chairman and Dolphin Coast principal Andreas Wassenaar says the July reduction of the repurchase rate by 50 basis points reflected the impact of the slowing global market on the local economy and SA's main trading partners but paved the way for cash buyers, in particular, to take advantage of a buyers' market. "It's said you make your profit in property when you buy, not when you sell. If that is the case, rarely has there been a better profit-making opportunity," he says.
Pam Golding Properties uMhlanga and eMdloti area principal Elwyn Schenk believes the dilemma facing aspiring and potential investors has "never been so acute", underlining why property again appears to be a traditional, solid and lasting store of value. "Investors view investment property as the ultimate inflation hedge, providing a regular, escalating income and healthy capital growth. "Globally, fortunes have been made through property investments and today's tighter market conditions present an opportunity to buy property, often below replacement cost," he says.
However, as with every investment, property requires a selective approach. Key to decision-making is position, with blue-chip areas and high-growth nodes likely to be more attractive. Typically, these include properties in the Western Cape, Northern Durban/uMhlanga and Sandton, but also areas where substantial government infrastructure spending will spur growth, such as port developments around Richards Bay. Schenk says property is one of the few asset classes against which people can borrow. This is especially beneficial at times of low interest rates, since gearing can be maximised to improve net returns. But investors also need to understand investment dynamics. "Sound investment logic does not mean buying the best property in the area. Billionaire Warren Buffet recently advised US investors to buy older homes in good areas to restore, to hold or resell," he says. In uMhlanga, prices range from R700 000 for a one-bedroom flat near Gateway to R18.9 Million for an Oyster Quays penthouse, with a range of options between.
Harcourts Hilton principal Andrew Line says the English-style village is in demand for buy-to-let or potential bed-and-breakfast outlets. These properties offer opportunities for investors to secure assistance in paying off a bond. One entry-level property was a five bedroom house priced at R1.15m, while at the top end of the market was a seven bedroom gentleman's residence in two of landscaped garden complete with a formal lounge, chef's kitchen, billiard room and gym offering potential for conversion to a boutique hotel. Line says buy-to-let investors have dwindled significantly in recent years, but are now returning to the market with renewed vigour and confidence.
HOWEVER, RE/MAX OF SOUTHERN AFRICA CHIEF EXECUTIVE, ADRIAN GOSLETT says determining the fair market value for any property depends on numerous aspects that influence the perceived value. That means correctly pricing a home is paramount, especially in a buyers' market. "If a buyer compares two properties in the same area offering the same features, price will become the only factor that will separate each property and influence the decision-making process," he says. Consequently, it is vital for agents to complete a comparative market analysis to provide sellers with the foundation from which to work. The base analysis then provides the platform on which a home's distinctive characteristics can then add or detract value to ensure a fair market price and the swiftest time between going to market and concluding a sale.
Seeff regional chairman and Dolphin Coast principal Andreas Wassenaar says the July reduction of the repurchase rate by 50 basis points reflected the impact of the slowing global market on the local economy and SA's main trading partners but paved the way for cash buyers, in particular, to take advantage of a buyers' market. "It's said you make your profit in property when you buy, not when you sell. If that is the case, rarely has there been a better profit-making opportunity," he says.
Pam Golding Properties uMhlanga and eMdloti area principal Elwyn Schenk believes the dilemma facing aspiring and potential investors has "never been so acute", underlining why property again appears to be a traditional, solid and lasting store of value. "Investors view investment property as the ultimate inflation hedge, providing a regular, escalating income and healthy capital growth. "Globally, fortunes have been made through property investments and today's tighter market conditions present an opportunity to buy property, often below replacement cost," he says.
However, as with every investment, property requires a selective approach. Key to decision-making is position, with blue-chip areas and high-growth nodes likely to be more attractive. Typically, these include properties in the Western Cape, Northern Durban/uMhlanga and Sandton, but also areas where substantial government infrastructure spending will spur growth, such as port developments around Richards Bay. Schenk says property is one of the few asset classes against which people can borrow. This is especially beneficial at times of low interest rates, since gearing can be maximised to improve net returns. But investors also need to understand investment dynamics. "Sound investment logic does not mean buying the best property in the area. Billionaire Warren Buffet recently advised US investors to buy older homes in good areas to restore, to hold or resell," he says. In uMhlanga, prices range from R700 000 for a one-bedroom flat near Gateway to R18.9 Million for an Oyster Quays penthouse, with a range of options between.
Harcourts Hilton principal Andrew Line says the English-style village is in demand for buy-to-let or potential bed-and-breakfast outlets. These properties offer opportunities for investors to secure assistance in paying off a bond. One entry-level property was a five bedroom house priced at R1.15m, while at the top end of the market was a seven bedroom gentleman's residence in two of landscaped garden complete with a formal lounge, chef's kitchen, billiard room and gym offering potential for conversion to a boutique hotel. Line says buy-to-let investors have dwindled significantly in recent years, but are now returning to the market with renewed vigour and confidence.
HOWEVER, RE/MAX OF SOUTHERN AFRICA CHIEF EXECUTIVE, ADRIAN GOSLETT says determining the fair market value for any property depends on numerous aspects that influence the perceived value. That means correctly pricing a home is paramount, especially in a buyers' market. "If a buyer compares two properties in the same area offering the same features, price will become the only factor that will separate each property and influence the decision-making process," he says. Consequently, it is vital for agents to complete a comparative market analysis to provide sellers with the foundation from which to work. The base analysis then provides the platform on which a home's distinctive characteristics can then add or detract value to ensure a fair market price and the swiftest time between going to market and concluding a sale.
Buyers Struggle To Meet Lending Criteria
While property pricing and market conditions favour buyers, many are still struggling to meet the lending criteria of financial institutions. In light of this, many buyers are choosing to partner with a friend or family member to purchase property together.
This was the opinion of Adrian Goslett, CEO of RE/MAX of Southern Africa in a recent press release. In today's property market, co-ownership has become an especially attractive option as the shared costs make it a much more affordable venture. Although some banks no longer offer joint cheque or savings accounts, Goslett said that due to the vast number of buyers who are choosing to co-own with another party, many lenders do offer joint home loan accounts or mortgage packages that cater specifically for this situation.
He said there are definitely advantages of buying property with a partner, such as the greater prospect of finance being approved as well as the possibility of obtaining a bond for a higher amount. Additionally, there is the benefit of a reduced individual financial commitment as all costs during and after the purchase process are shared.
"Both parties can contribute to the deposit, transaction costs, bond repayments, as well as the maintenance and utilities bills," said Goslett. "It is important, however, that co-ownership is handled in the correct manner and that all aspects are discussed before any transaction has been concluded. It is advisable that there is an agreement in writing that is signed by both parties, should any dispute arise in the future."
Goslett noted that some of the points that should be discussed and agreed upon between the parties are aspects such as:
- What each one wants from the venture,
- How long they plan to live together,
- What happens if one wants to sell their share of the property in the future
The future plans of both parties will have a major impact on the partnership and how viable it is. Each of the respective parties will have to be in agreement with regard to their expectations as well as their individual responsibilities. Along with the shared cost, also comes shared responsibility. To protect both co-owners, each partner should keep a record of all documents and payments made that relate to the property they jointly own.
If one person defaults on any of the payments, all partners will be held liable. It is for this reason that choosing the right person to buy property with is so important and should be considered carefully.
This was the opinion of Adrian Goslett, CEO of RE/MAX of Southern Africa in a recent press release. In today's property market, co-ownership has become an especially attractive option as the shared costs make it a much more affordable venture. Although some banks no longer offer joint cheque or savings accounts, Goslett said that due to the vast number of buyers who are choosing to co-own with another party, many lenders do offer joint home loan accounts or mortgage packages that cater specifically for this situation.
He said there are definitely advantages of buying property with a partner, such as the greater prospect of finance being approved as well as the possibility of obtaining a bond for a higher amount. Additionally, there is the benefit of a reduced individual financial commitment as all costs during and after the purchase process are shared.
"Both parties can contribute to the deposit, transaction costs, bond repayments, as well as the maintenance and utilities bills," said Goslett. "It is important, however, that co-ownership is handled in the correct manner and that all aspects are discussed before any transaction has been concluded. It is advisable that there is an agreement in writing that is signed by both parties, should any dispute arise in the future."
Goslett noted that some of the points that should be discussed and agreed upon between the parties are aspects such as:
- What each one wants from the venture,
- How long they plan to live together,
- What happens if one wants to sell their share of the property in the future
The future plans of both parties will have a major impact on the partnership and how viable it is. Each of the respective parties will have to be in agreement with regard to their expectations as well as their individual responsibilities. Along with the shared cost, also comes shared responsibility. To protect both co-owners, each partner should keep a record of all documents and payments made that relate to the property they jointly own.
If one person defaults on any of the payments, all partners will be held liable. It is for this reason that choosing the right person to buy property with is so important and should be considered carefully.
Wednesday 19 September 2012
Friday 31 August 2012
Hello From Plett - September 2012
Spring is upon us, at last. Let's all say a resounding goodbye to winter. Everything is green and flourishing and is starting to bud. Hopefully, this is a sign of good things to come and a prosperous year ahead.
August has been a sad month in Plett, with our Lagoon's new mouth claiming six lives in a tragic, family fishing trip gone horribly wrong. Members of the Wildeman, Waits and Figland families, including an eight year old boy, drowned when their small boat capsized in the river mouth. Extensive searches by NSRI, AMS Helicopters and police divers resulted in the recovery of four bodies, two men are still missing. The whole community mourned these deaths involving three old Plett families.
On a lighter note, we are very proud of our RE/MAX Sales Associate, Bruce Noble, who has stirred, fried and grilled his way into the final of Plett's "So You Think That You Can Cook" competition, with a prize of a family trip to Mozambique. Good Luck Bruce!!
We have seen a definite increase in interest in property over the past couple of months. Volumes of sales have increased but prices remain low, with many bargains to be had. Buyers still have plenty of choice.
August has been a sad month in Plett, with our Lagoon's new mouth claiming six lives in a tragic, family fishing trip gone horribly wrong. Members of the Wildeman, Waits and Figland families, including an eight year old boy, drowned when their small boat capsized in the river mouth. Extensive searches by NSRI, AMS Helicopters and police divers resulted in the recovery of four bodies, two men are still missing. The whole community mourned these deaths involving three old Plett families.
On a lighter note, we are very proud of our RE/MAX Sales Associate, Bruce Noble, who has stirred, fried and grilled his way into the final of Plett's "So You Think That You Can Cook" competition, with a prize of a family trip to Mozambique. Good Luck Bruce!!
We have seen a definite increase in interest in property over the past couple of months. Volumes of sales have increased but prices remain low, with many bargains to be had. Buyers still have plenty of choice.
Understanding Capital Gains Tax
It is important for property buyers and sellers to be aware of the implications of capital gains tax (CGT) and how it could affect their future property transactions. CGT is tax payable by the seller of an asset or fixed property on the profit made from the transaction, and applies to all South African resident taxpayers, companies, close corporations and trusts.
It includes any capital gains made from the sale of assets both here and overseas. Resident taxpayers who are not South African citizens and who sell immovable property in SA are also liable for CGT. However, Adrian Goslett, CEO of RE/MAX of Southern Africa, said there were certain exclusions applicable to CGT. 'For example, if an individual sells their primary residence they will need to make more than R2 million profit on the sale before CGT is applicable.' A primary residence is defined as a property that is owned by a natural person. It must be the main residence of the individual and must predominantly be used for domestic purposes. Deductions would be made from the exempted gains to account for periods when the property was not used as a primary residence or was used as a business property.
According to Goslett, where a primary residence is registered jointly in the names of a husband and wife, they would each benefit from a respective R2-million abatement on their share of the capital gain as both are considered taxpayers. However, both parties would have to reside in the property and a husband and a wife could not each have a primary residence. No exemptions apply to capital gains from the sale of a second house or holiday home.
'To calculate the capital gain of a transaction, sellers need to deduct the price of the property sold from the base cost of the property. 'The base cost is calculated by adding the original price paid for the property to the total cost of buying and selling the property, including the estate agent's commission, attorney fees and the cost of any inspections by electricians or plumbers. 'The cost of any renovations that qualify as improvements to the property can also be included; however, costs of routine maintenance may not,' says Goslett.
He said the SA Revenue Service wold then calculate CGT based on the net profit realised. 'The capital gain amount will then be added to the individual's income and taxed according to the tax brackets. 'The CGT becomes payable when the individual's income tax return is submitted at the end of the financial year during which the property was sold.'
It includes any capital gains made from the sale of assets both here and overseas. Resident taxpayers who are not South African citizens and who sell immovable property in SA are also liable for CGT. However, Adrian Goslett, CEO of RE/MAX of Southern Africa, said there were certain exclusions applicable to CGT. 'For example, if an individual sells their primary residence they will need to make more than R2 million profit on the sale before CGT is applicable.' A primary residence is defined as a property that is owned by a natural person. It must be the main residence of the individual and must predominantly be used for domestic purposes. Deductions would be made from the exempted gains to account for periods when the property was not used as a primary residence or was used as a business property.
According to Goslett, where a primary residence is registered jointly in the names of a husband and wife, they would each benefit from a respective R2-million abatement on their share of the capital gain as both are considered taxpayers. However, both parties would have to reside in the property and a husband and a wife could not each have a primary residence. No exemptions apply to capital gains from the sale of a second house or holiday home.
'To calculate the capital gain of a transaction, sellers need to deduct the price of the property sold from the base cost of the property. 'The base cost is calculated by adding the original price paid for the property to the total cost of buying and selling the property, including the estate agent's commission, attorney fees and the cost of any inspections by electricians or plumbers. 'The cost of any renovations that qualify as improvements to the property can also be included; however, costs of routine maintenance may not,' says Goslett.
He said the SA Revenue Service wold then calculate CGT based on the net profit realised. 'The capital gain amount will then be added to the individual's income and taxed according to the tax brackets. 'The CGT becomes payable when the individual's income tax return is submitted at the end of the financial year during which the property was sold.'
Should You Rent Or Buy In Today's Market?
While current conditions have opened up the property market to many buyers that may not have been able to purchase property during the boom period, some consumers are still hesitant to dip their toe in the property ownership pool and would rather continue to rent, says Adrian Goslett, the CEO of RE/MAX of Southern Africa.
"For certain buyers, it is a question of whether they feel it is currently more financially sensible to buy their own property or to just rent one until they see more drastic improvements in the market," says Goslett. "However, for others there is far less choice in the matter. While the number of South African homeowners has risen over the past 10 years, many are still struggling to show the necessary affordability levels required by financial institutions and have no choice but to rent. The South African personal debt-to-income ratios remain relatively high and many aspiring homeowners are working on reducing debt levels in order to take advantage of the opportunities available for buyers in the present market."
With banks' lending criteria still strict and approximately 51% of home loan applications being approved, demand for rental property has increased dramatically over the last few years. The rental market continues to see an influx of tenants looking for rental property at reasonable prices. "The increased momentum in the rental market has been greatly welcomed by investors that have a buy-to-let portfolio. There is a constant demand for rental property and it is relatively easy to find tenants.
"From an investment perspective the low interest rates have meant that investors who have financed their purchases will be paying less on their monthly bond repayments and seeing a greater return on their investment," says Goslett. "The market conditions are also primed for investors that have the access to finance to purchase additional property and to build their portfolio."
According to Goslett, in some cases it is more feasible for consumers to rent, particularly if they are unsure of their future plans or where they want to be in the next five to ten years. "Purchasing property is a long term commitment, while some consumers may want the freedom to relocate to a different city for employment reasons or a change in lifestyle. Sometimes tenants can also find property that they can afford to rent, that they probably would not be able to afford to buy," he says.
Goslett says the money saved by renting could be put towards buying property at a later stage or could be used to bring down household debt levels. "However," he says, "many consumers end up increasing their living standards rather than saving that money and paying off debt." Therein lies the crux of the matter. Many consumers lack the restraint to withhold on living above their means so they can save. Goslett says the big argument for buying a home instead of renting one is that owning your own home is in fact a kind of forced saving. "The reality of the matter is that most South Africans do not save enough money for their retirement. The country's current household saving rate is around 16%, which is relatively low when compared to other emerging markets.
"However, being able to sell your home that you paid off over 20 years, and downsizing will no doubt offer welcome financial relief when it is needed most. South African's that have rented for their entire lives will have no asset to sell." To make the most out of property investment, the secret is to get into the market as early as possible, advises Goslett. "While a buyer may have to initially tighten their belt to meet the monthly repayments, assuming there are no drastic changes, a 20 year bond will decrease in real terms as the buyer's salary increases, making the bond more affordable as time passes. This means that the earlier a buyer gets into the market, the better off they will be," he says. "If possible, homeowners should also try and put any extra money into their bond to reduce the terms and save on the interest paid on the loan."
Whether renting or buying, each option has its own advantages and disadvantages. "Each consumer is at different stages of their lives which involve different needs and levels of affordability. Renting can give a tenant the flexibility they may require before they make a long term commitment, while buying can provide a homeowner with an asset to their name that will certainly show good returns in time to come," Goslett says.
Low Rates Assist Property Homebuyers
The interest rates have remained at a 30-year low since November 2010 and are likely to stay there a while longer, says Adrian Goslett, CEO of RE/MAX of Southern Africa. Why is this important for the South African property market and homeowners? "The majority of South African homeowners and buyers are loan dependent and require financial assistance to purchase property. This means that the interest rates will affect most consumers at some stage of their lives in some way," says Goslett.
He notes that the interest rates have a massive affect on the property market and particularly consumers who are already homeowners. If a person has chosen to fix their interest rate amount then they will be much less affected by the fluctuations of the rates over the term of their loan. However, homeowners who haven't fixed their rate will have reduced monthly repayments the lower the interest rate and increased repayments if it goes up. "A low interest rate could give a homeowner the ability to pay extra money into their bond, reduce the term of the loan and pay it off faster, without affecting their monthly budget to severely," he comments.
During the boom period banks were offering a repayment percentage on residential property of prime less two. This is no longer the case and most financial institutions are offering a rate of prime. "However," says Goslett, "this still translates to a reduced repayment on new loan agreements because since the boom period the prime interest rate has been reduced by 5,5%. In fact, in today's property market the overall monthly bond repayments are a great deal cheaper. This, coupled with where property pricing is at the moment, makes it an ideal time to buy property."
Aside from the possible fluctuations on repayments for homeowners, the interest rate directly affects buyers wanting to purchase property and how much they can afford. Since the introduction of the National Credit Act, banks have put a lot of emphasis on affordability levels. "The interest rate will impact the size of the bond which a buyer will be approved for. If the rate is lower, it is likely that the buyer will be able to afford a larger bond, provided all other aspects are in place," he mentions. "Paying interest at a lower rate will indirectly put more disposable money in the buyer's pocket and drive demand in the property market. More and more buyers with a clean credit record are finding it easier to raise finance and purchase property. The increased demand will push property pricing up at some stage and increase the home's value over time."
From an investment perspective the increased demand in property and the reduced monthly repayment will result in investors gaining more from their property portfolios. Property investors who have a rental portfolio, for example, will be able to charge the same rental for their units, while paying reduced bond repayments resulting in greater profit. The less interest that is paid on an investment property each year means the less net return that will need to be realised for the owner to see a return on their initial investment.
"Consumers who are interested in making the most of the current interest rates and want to invest in the property market should approach a bank or a reputable mortgage originator such as Betterbond, to ascertain exactly how much they can spend. Some may be surprised at the opportunity the interest rate has created in the market," concludes Goslett.
He notes that the interest rates have a massive affect on the property market and particularly consumers who are already homeowners. If a person has chosen to fix their interest rate amount then they will be much less affected by the fluctuations of the rates over the term of their loan. However, homeowners who haven't fixed their rate will have reduced monthly repayments the lower the interest rate and increased repayments if it goes up. "A low interest rate could give a homeowner the ability to pay extra money into their bond, reduce the term of the loan and pay it off faster, without affecting their monthly budget to severely," he comments.
During the boom period banks were offering a repayment percentage on residential property of prime less two. This is no longer the case and most financial institutions are offering a rate of prime. "However," says Goslett, "this still translates to a reduced repayment on new loan agreements because since the boom period the prime interest rate has been reduced by 5,5%. In fact, in today's property market the overall monthly bond repayments are a great deal cheaper. This, coupled with where property pricing is at the moment, makes it an ideal time to buy property."
Aside from the possible fluctuations on repayments for homeowners, the interest rate directly affects buyers wanting to purchase property and how much they can afford. Since the introduction of the National Credit Act, banks have put a lot of emphasis on affordability levels. "The interest rate will impact the size of the bond which a buyer will be approved for. If the rate is lower, it is likely that the buyer will be able to afford a larger bond, provided all other aspects are in place," he mentions. "Paying interest at a lower rate will indirectly put more disposable money in the buyer's pocket and drive demand in the property market. More and more buyers with a clean credit record are finding it easier to raise finance and purchase property. The increased demand will push property pricing up at some stage and increase the home's value over time."
From an investment perspective the increased demand in property and the reduced monthly repayment will result in investors gaining more from their property portfolios. Property investors who have a rental portfolio, for example, will be able to charge the same rental for their units, while paying reduced bond repayments resulting in greater profit. The less interest that is paid on an investment property each year means the less net return that will need to be realised for the owner to see a return on their initial investment.
"Consumers who are interested in making the most of the current interest rates and want to invest in the property market should approach a bank or a reputable mortgage originator such as Betterbond, to ascertain exactly how much they can spend. Some may be surprised at the opportunity the interest rate has created in the market," concludes Goslett.
Thursday 30 August 2012
Pros and Cons of Property Partner Purchases
While property pricing and market conditions favour buyers, many are still struggling to meet the lending criteria of financial institutions. In light of this, many buyers are choosing to partner with a friend or family member to purchase property together, says Adrian Goslett, CEO of RE/MAX of Southern Africa.
In today's property market, co-ownership has become an especially attractive option as the shared costs make it a much more affordable venture.
Although some banks no longer offer joint cheque or savings accounts; Goslett says that due to the vast number of buyers who are choosing to co-own with another party, many lenders do offer joint home loan accounts or mortgage packages that cater specifically for this situation.
"There are definitely advantages of buying property with a partner, such as the greater prospect of finance being approved as well as the possibility of obtaining a bond for a higher amount. Additionally, there is the benefit of a reduced individual financial commitment as all costs during and after the purchase process are shared. Both parties can contribute to the deposit, transaction costs, bond repayments, as well as the maintenance and utilities bills," says Goslett. "However, it is important that co-ownership is handed in the correct manner and that all aspects are discussed before any transaction has been concluded. It is advisable that there is an agreement in writing that is signed by both parties, should any dispute arise in the future."
Goslett notes that some of the points that should be discussed and agreed upon between the parties are aspects such as what each one wants from the venture, how long they plan to live together, and what happens if one wants to sell their share of the property in the future. The future plans of both parties will have a major impact on the partnership and how viable it is.
Each of the respective parties will have to be in agreement with regards to their expectations as well as their individual responsibilities. "Along with the shared costs, also comes shared responsibility. To protect both co-owners, each partner should keep a record of all documents and payments made that relate to the property they jointly own. If one person defaults on any of the payments, all partners will be held liable. It is for this reason that choosing the right person to buy property with is so important and should be considered carefully. The relationship must be based on trust and each partner should be open and hones with the other. All financial matters or difficulties that could affect the property should be discussed, so that they can be dealt with appropriately before a problem arises. For precautionary measures each partner should also have a will drawn up that addresses what will take place should anything happen to either party," advises Goslett.
He notes that those who want to purchase property with a partner have chosen the right time to do so. "The conditions in the market such as ideal property pricing and low interest rates have given rise to many opportunities in the property sector.
Through sharing the deposit and bond repayments, those who are unable to show the necessary affordability on their own, can still take advantage of the current buyer's market by investing with a trusted partner," Goslett concludes.
In today's property market, co-ownership has become an especially attractive option as the shared costs make it a much more affordable venture.
Although some banks no longer offer joint cheque or savings accounts; Goslett says that due to the vast number of buyers who are choosing to co-own with another party, many lenders do offer joint home loan accounts or mortgage packages that cater specifically for this situation.
"There are definitely advantages of buying property with a partner, such as the greater prospect of finance being approved as well as the possibility of obtaining a bond for a higher amount. Additionally, there is the benefit of a reduced individual financial commitment as all costs during and after the purchase process are shared. Both parties can contribute to the deposit, transaction costs, bond repayments, as well as the maintenance and utilities bills," says Goslett. "However, it is important that co-ownership is handed in the correct manner and that all aspects are discussed before any transaction has been concluded. It is advisable that there is an agreement in writing that is signed by both parties, should any dispute arise in the future."
Goslett notes that some of the points that should be discussed and agreed upon between the parties are aspects such as what each one wants from the venture, how long they plan to live together, and what happens if one wants to sell their share of the property in the future. The future plans of both parties will have a major impact on the partnership and how viable it is.
Each of the respective parties will have to be in agreement with regards to their expectations as well as their individual responsibilities. "Along with the shared costs, also comes shared responsibility. To protect both co-owners, each partner should keep a record of all documents and payments made that relate to the property they jointly own. If one person defaults on any of the payments, all partners will be held liable. It is for this reason that choosing the right person to buy property with is so important and should be considered carefully. The relationship must be based on trust and each partner should be open and hones with the other. All financial matters or difficulties that could affect the property should be discussed, so that they can be dealt with appropriately before a problem arises. For precautionary measures each partner should also have a will drawn up that addresses what will take place should anything happen to either party," advises Goslett.
He notes that those who want to purchase property with a partner have chosen the right time to do so. "The conditions in the market such as ideal property pricing and low interest rates have given rise to many opportunities in the property sector.
Through sharing the deposit and bond repayments, those who are unable to show the necessary affordability on their own, can still take advantage of the current buyer's market by investing with a trusted partner," Goslett concludes.
Monday 20 August 2012
Ask The Right Questions
As the biggest investment decision many South African consumers will ever make, purchasing property is not one to be taken lightly and it is important for buyers to ask the right questions before committing to such a large investment.
The most important factors that buyers need to think about
when searching for property in which to invest are:
Tuesday 7 August 2012
Tips For Buying Investment Property
Purchasing an
investment property can be an intimidating and often risky business, but it is
also a way to ensure a solid financial future for those who can master it.
While seasoned
property investors will generally have a vast understanding of the property
market, many first-time buyers or those relatively new to the property game
will often make the wrong and sometimes very costly decisions. Although
lucrative opportunities can be found in the current market, it is important for
buyers to avoid certain pitfalls that can impact on their return on
investment.
Any property buyer
should take note of the following tips:
Have patience, don’t be in a hurry - Take the time to do the necessary
research.
Location is everything – The importance of buying in a prime location cannot
be over emphasised. A property in a bad location will never fetch a premium
price, even in a boom period.
Don’t make assumptions - It is always advisable to have a professional home
inspector to take a look at the property.
Seek help, don’t do this alone - Rather learn from other people’s
mistakes than your own. Most buyers should seek guidance and advice from other
seasoned investors and real estate professionals.
Keep an eye on the budget - Investors should undertake an in-depth budget and
cash flow analysis in order to ascertain their accurate financial position.
Buyers should also compare financing deals from various financial institutions
before deciding to secure their home loan.
Proper maintenance - Whether the property is bought as a primary
residence or as part of a rental portfolio, keeping the property in good order
is a vital part to ensuring a good return on that investment. Buyers should include maintenance costs as part
of their budget and plan and ensure they have the time or capacity to properly
manage and maintain their property.
Don’t put all your eggs in one basket - When buying property specifically for
investment purposes, it is imperative to diversify your portfolio. This
will largely minimise exposure to risk. Buyers should try to buy different
kinds of properties in various areas, rather than buying a few properties in
one development.
Property buyers
should learn as much as possible about the environment they are trading in,
consult various experts and make use of professional, reputable and
knowledgeable estate agents to assist them in the sales process.
Friday 3 August 2012
Hello From Plett - August 2012
Winter has certainly made itself felt in Plett this year, with daytime temperatures down to 6 degrees at times, but as is always the case, in the area, this freezing and very wet weather has been interspersed with the most stunning, bright, crisp and gorgeous sunny days!
The worst of the weather over July caused the Bitou and Keurbooms Rivers to flood again, from excessive rainfall in the high lying areas, bringing a wave of trees and debris into the Keurbooms lagoon, and most dramatically, being instrumental in the opening of a new mouth in the lagoon, almost opposite Plett Caravan Park. We now have two mouths vying for dominance, causing much speculation as to which one will remain and which will close up. Local residents are closely watching developments here, which could have an impact on the Poortjies area.
The shock announcement made by Human Settlements Minister, Tokyo Sexwale, on 31st July, of the disbanding of the Estate Agent's Affairs Board, has left the property industry reeling. Bad service delivery by the Board has been a complaint from the industry for many years, and we eagerly await an announcement of the way forward.
We have all been glued to our television sets watching our athletes and swimmers at the Olympic Games in London. At the time of going to print, we have two gold medals from swimmers Cameron Van Der Burgh and Chad Le Clos and a third gold medal from our rowing team, Sizwe Ndlovu, Matthew Brittain, John Smith and James Thompson. Well done boys! We are so proud of you! I think that each and every one of us gets a little teary eyed when we hear our National Anthem being played.
GO SOUTH AFRICA!!
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