Superstar Strategies

Training and Development for the Real Estate industry. Real estate training, consulting and mentoring built from 40 years of experience, producing top performers and and successful businesses in South Africa.

[superstarstrategies]

Absa’s Homeowners Sentiment Index for Q1 2022 shows improvements despite inflationary pressures

The Absa Homeowner Sentiment Index for Q1 of this year is debatably one of the most important sentiment analyses to date, given the return to interest rate hikes since the decreases that Covid-19 brought about.

In spite of the two interest rate hikes that took place during this quarter, the first in January and the second in March, each of 25 basis points, sentiment increased to 81%. This is a two-percentage- point (pp) increase from Q4 2021, where Absa noted a slight dip in sentiment due to the discovery of the omicron virus and travel ban restrictions imposed on southern African countries.

Respondents cite high demand for properties and the potential to make a good profit as some of the key drivers for this high confidence.

The segment with the highest overall confidence in the property market, in Q1 2022, is among respondents who have never owned property before (84%), closely followed by first-time homeowners at 82%, followed by non-first-time homeowners (76%).

Investors were the only segment that showed a decline (down 5pp) in overall confidence, citing concerns of economic and political instability coupled with high levels of unemployment. The unemployment rate has been on a steadily increasing during 2021, reaching 35.3% in Q4 of 2021, but it seems to be levelling off in Q1 2022.

“We are, however, seeing some indicators that interest rates are becoming a cause of concern, as the number of respondents that cited favourable interest rates as a reason for positive sentiment has reduced significantly, dropping 10pp,” says Lindiwe Malobola, Lead Data Scientist Home Loans at Absa.

”Both buying and selling sentiments have increased and were reported as 78% and 44% respectively. Respondents see property as a good investment that accumulates in value. They are also citing potential bargains in the market due to a belief that there are property owners that are desperate to sell and there is a large supply of properties on the market currently.”

Investors had the highest buying sentiment increase (up 6pp) and, together with first-time homeowners, lead buying sentiment at 78%, respectively. “Considerably more investor respondents believe that market conditions remain conducive for buying as they perceive interest rates as sufficiently low and prices being affordable with potential bargains still present in the market,” says Malobola.

Despite having the highest sentiment towards buying (matching investors), first-time homeowners were the only segment to show a quarter-on-quarter decline, down 2pp this quarter. This is the second quarter-on-quarter decline in buying sentiment for this segment. First-time homeowners are citing the increasing cost of living, high unemployment, high interest rates and high property prices as the main drivers for negative sentiment.

“Significant inflationary pressure was felt by consumers in Q1 2022,” says Malobola. “This is due to increasing fuel prices by approximately R2/l over this quarter as well as ongoing interest rate increases. Further inflationary pressure is also expected as supply chain interruptions emerge due to the invasion of Ukraine by Russia, which will place additional upward pressure on fuel and food prices.

“It is, however, different for non- first-time homeowners, where we are seeing increases in three important sub-indices, those of buying, selling and investing. This segment is less likely to be severely impacted in the short- to medium term.”

1.      Selling sentiment continues its upward trajectory, in Q1 2022 increasing by 2pp, to reach its highest level in the past three years, and almost doubling Q1 2020 level (23%). “This is the third consecutive quarter-on-quarter increase, rising 9pp from Q1’21,” confirms Malobola. “Like the previous quarter, this increase in selling sentiment is driven by the expectation of receiving a good selling price and consumers looking to upgrade. There is also a group of respondents who are considering selling as they can no longer afford their properties.

Malobola says that although the analysis is not definitive Absa forecasts a gradual decline in buying sentiment and a slow increase in selling sentiment, which may translate into a slight decline in demand, and an increase in the supply of residential property in the country. “So a buyers market is still active, and we are likely to see a further decline in house price inflation in the medium-term.”

Inland vs Coastal

Interestingly, one of the biggest reveals in the Absa Sentiment Index for quarter one is the building of a return to confidence in the South African inland property market - as opposed to coastal. “Here we saw a rise of six pp versus a drop in coastal of two pp,” says Malobola. “These percentages have largely been derived by the six pp drop in the Western Cape and one pp decrease in KwaZulu-Natal, and the five pp increase in sentiment in Gauteng.” KZN’s sentiment is likely to reduce due to the significant property damage caused by flooding in certain parts of the province’s coastal line.

Investment sector

Overall investment sentiment declined by one pp and further declined across all sub-indices except for the non- first-time homeowner segment, which saw an increase of three pp in Q1 20022 vs that of Q4 2021. “This group of respondents believe that it is a good time to buy investment properties as it’s a good source of passive income,” says Malobola. “The decline in investment sentiment is interesting because it does not align with the rental market performance as reported in TPNs 2022 Q1 vacancy survey, which showed that there is a positive turnaround in the rental market, with the exception of KZN. Vacancies are reducing, and rental escalations are starting to increase,” so we are expecting to see investment sentiment starting to stabilise and increase in the medium term.”

Outlook

In summary, Malobola says that South Africans can expect an additional minimum 100 basis point increase in the interest rate during the year. “This is likely to dampen activity within the property market, possibly resulting in a reduction in sentiment in the medium-term.

“There is also a cohort, although they make up a smaller percentage, that continues to feel affordability pressures due to residual impacts of Covid. In the coming months, if the economic situation does not improve for this cohort, we will likely see more homeowners selling due to mounting financial pressure and the need for liquid assets. On the other hand, those that do own investment properties will probably continue to hold onto the property as a source of additional income as national rental vacancy rates revert to the normal range.”

SOURCE: www.privateproperty.co.za

[superstarstrategies]

Benefits of owning a home remain constant amid rate fluctuations

Although higher than hoped, the recent repo rate increase was not unexpected, says Carl Coetzee, CEO of BetterBond. “While the 50-basis point increase will have an impact on monthly bond repayments, and how much aspirant buyers will be able to afford, it is worth noting that prime lending rate is still considerably lower than it was two years ago before the pandemic.”

The monthly repayment on a R2 million home at the start of 2020 when the prime lending rate was 10% which was R2 259 more than it will be at the current 8.25%, says Coetzee.

“Furthermore, there are ways to buffer the impact of rate changes. Working with a bond originator who will negotiate with the banks on buyers’ behalf to secure a better rate will help soften the blow of this and subsequent rate increases.” BetterBond’s average interest rate concession when applying to four banks is 0.61% .

Using the same example of the R2 million bond, this means that a 0.61% concession on the current interest rate of 8.25% would reduce the monthly bond repayment by just over R750. If this revised monthly payment is compared with what a homeowner would have paid in 2020, the saving is a significant R3 016, explains Coetzee. “There are still opportunities for buyers who want to make the most of the comparatively low interest rate while it is still in single digits,” says Coetzee.

While the property market has emerged from the pandemic stronger than expected, we can’t ignore inflationary pressures and the impact of the ongoing conflict in Ukraine on global food prices, says Coetzee.

“So this rate increase does serve as a reminder that affordability should always be a consideration when buying a home. Homeowners should factor in future rate hikes into the calculations of what they can afford to pay on a bond each month.”

Notwithstanding the challenging economic times, buyer activity remains robust and BetterBond has seen a 10% increase in the ratio of formally granted bonds year-on-year, according to April data, says Coetzee. Also, the latest Absa Homeowner Sentiment Index for Q1 of 2022 shows that 56% of respondents still believe it is better to own a home than to rent. Overall confidence in the property market is higher than it was at the end of 2021, with the sentiment towards buying property increasing marginally. Most of the respondents in favour of purchasing a property agreed that it is because it is a proven investment that accumulates value.

“While rates will fluctuate over time, affecting bond repayments and affordability, there are other reasons for buying a home that remain constant. There’s the satisfaction that comes with owning an asset that will appreciate in value over time, as well as the security of knowing that the home is yours for as long as is needed,” says Coetzee.

Source : www.privateproperty.co.za

[superstarstrategies]

Repo rate comment May 2022

The South African Reserve Bank's (SARB) Monetary Policy Committee (MPC) announcement that the repo rate is to increase by 50 basis points was not a surprise for the property industry.

At its previous meeting in March 2022, SARB Governor Lesetja Kganyago said that, given the inflation forecast, the implied policy rate path of the bank’s Quarterly Projection Model (QPM) indicates gradual normalisation through to 2024. Therefore, increases have been widely expected as part of the post-Covid interest rate normalisation trend. As a result, economists predict several more hikes this year, with the prime widely expected to reach 9.5% by December.

In his May statement, Kganjago cited various factors that affected the SA economy and influenced the committee’s decision to hike the repo rate. These included the Omicron variant, which has affected the whole world and the war in Ukraine.

“The economic costs of Covid generally continue to fall, as most economies remained open despite the rapid spread of the Omicron variant. The sustained invasion of Ukraine by Russia and China's response to the new outbreak will, however, weigh heavily on global economic growth and contribute to higher inflation,” said Kganjago.

“The war has impaired the trade and production of a wide range of food, energy and other commodities and will continue to do so for some time. As a result, the International Monetary Fund (IMF) reduced its global growth forecast for 2022 to 3.6%.”

He said the SARB revised its forecast for global growth in 2022 to 3.5% - down from 3.7% at the March meeting. For 2023 growth is lowered from 2.8% to 2.7%. For 2024, global growth will remain unchanged at 2.7%.

The governor said that dramatically higher oil, commodity and food prices, additional constraints on trade and finance, as well as rising debt costs had created worsening economic conditions for most developing and emerging economies.

Industry response

Tony Clarke, Managing Director of the Rawson Property Group, says: "We were hoping for a more moderate 25 basis point hike, but the 50-point increase wasn't entirely unexpected. Between the rising international interest rates, weaker rand and massive fuel price hikes on the horizon – which will likely push inflation over the SARB's 6% upper limit – there was little else the MPC could reasonably do."

He says there is always hope for a reversal of the upward trend and expects the effect of the current increases on the property industry to be noticeable but not catastrophic.

“We expect a slight drop in demand with a corresponding increase in stock levels,” he says. "Buyers will be extremely cost-conscious and demanding and not afraid to negotiate. Sellers will need to take this into account when positioning their properties, leaning on the skills of property professionals to compete effectively.”

Regional director and chief executive of RE/MAX of Southern Africa, Adrian Goslett, hopes that homeowners have planned for these interest rate hikes and have already made room in their budgets to afford the slightly higher debt repayments.

“There are so many unknown variables around interest rate fluctuations that it is impossible to tell with absolute certainty whether fixing your interest rate now will be more beneficial for you in the long run,” says Goslett.

He says rising interest rates also pose challenges for real estate agents as buyers become more hesitant. However, he advises agents to remind buyers that prime was at 10% before the Covid-19 pandemic, so interest rates are still relatively low despite this year’s interest rate hikes.

Lew Geffen Sotheby’s International Realty chief executive, Yael Geffen, says the repo rate increase of 50 basis points will affect all South Africans.

"South Africans are being squeezed from all sides, and there just isn't that much room in the economy. Home repayments for a R2 million bond at prime rate will increase by more than R600 a month with this increase. The housing market is still buoyant, but buyers need to budget carefully. We expect at least one more rate hike this year, so purchases should be made with that in mind.”

The managing director of the RealNet estate agency group, Gerhard Kotzé, says that homeowners should find it easier to upgrade to a better or bigger property following the interest rate increases announced after the MPC’s last four meetings.

“The effect of rate increases generally is to lower demand, increase the supply of homes for sale and prompt home sellers to rethink their selling prices – in that order. And as the market is currently experiencing these shifts, this is the right time for upgrading buyers to seize their opportunities.

“In addition, thanks to the huge influx of first-time buyers, prices have been rising faster at the lower end of the market than at the upper end for most of the past two years. This creates the opportunity for astute owners to move up the property ladder by selling their first homes at a substantial profit. They can then use most of this as a deposit on their upgrade home to lower their bond requirements – and repayments.”

Berry Everitt, chief executive of the Chas Everitt International property group, says: “When the US, the UK and other First World countries raise their interest rates - as they have done lately for the first time in years – investors tend to lose some interest in emerging economies like SA, and that has a negative effect on the rand.

“On the other hand, raising our interest rates at the same time keeps money flowing into the country, bolsters the rand and keeps the prices of fuel, food and other goods lower than they might otherwise be, which is good for us all, even if it is tough on those with debts to pay off.”

Dr Andrew Golding, chief executive of the Pam Golding property group, says: “We hoped the repo rate would be increased by 25 bps, rather than the 50 bps widely forecast. In addition to the weak economy, the case for hiking by only 25 bps was further supported by the fact that core inflation remains below the mid-point of the SARB’s inflation target - at just 3.9% in April. Headline inflation remained unchanged at 5.9% last month, which was marginally below market expectations and just within the upper limit of the inflation target.

“The impact on South Africa’s residential housing market is not expected to be significant, especially as this is still the lowest level of prime interest rate - now 8.25%, up from 7.75% - in more than two decades. After all, the prime rate was 8.5% between July 2012 and December 2013. For a home buyer with a bond of R1m over 20 years at a prime rate of 8.25%, bond repayments will increase from R8 209 a month to R8 521.”

Samuel Seeff, chairman of the Seeff Property Group, says: “The residential market continues to hold up well with buyers showing strong confidence. Although homeowners and buyers need to adjust to higher home loan repayments, the interest rate should remain below the pre-pandemic levels. Beyond the further 100 bps, we don’t anticipate any further impact on the interest rate.”

Seeff says it is still an excellent time for buyers and sellers to take advantage of the conditions. As the banks continue competing strongly, home loan finance is becoming more accessible, making the deposit requirements as low as 6% to 7%.

As a result of the latest rate hike, and based on a housing bond at the base rate of over 20 years, Seeff says homeowners and buyers will need to budget for higher monthly repayments as follows.

·         On a R750 000 bond, repayments will increase by R233 from R6 157 to R6 390.

·         On a R900 000 bond, repayments will increase by R280 from R7 389 to R7 669.

·         On a R1m bond, repayments will increase by R312 from R8 209 to R8 521.

·         On a R1,5m bond, repayments will increase by R467 from R12 314 to R12 781.

·         On a R2m bond, repayments will increase by R622 from R16 419 to R17 041.

·         On a R2,5m bond, repayments will increase by R778 from R20 524 to R21 302.

Carl van den Berg, Business Development Executive at Private Property, says that the 50-basis point rate hike was not wholly unexpected. He doesn't expect it to have much impact on the property market.

“Home loan finance is generally very accessible at the moment as the banks have been competing strongly, and we expect this to continue. Interest rates are still very low compared to the pre-Covid period, and properties that are marketed at the right price should still be selling within very reasonable timeframes. Overall, this is a positive trend.”

Source: www.privateproperty.co.za

[superstarstrategies]

Absa’s Future Rental Income for your property investment portfolio

The simplest definition of ‘buy-to-let' is that it’s the practice of buying a property that is rented out to tenants. It’s been proven, over decades, to be a successful investment strategy that helps to combat inflation and build wealth, among other beneficial returns. This is understood among those who already have at least a couple of properties in a portfolio.

But what if your property investment journey has stagnated, or you find yourself unable to progress financially beyond the two or more buy-to-let properties in your portfolio? Absa has the solution with its Future Rental Income facility. Miguel Martins, Portfolio Manager: Investors, Absa Home Loans, explains how the facility works and who qualifies.

“Future Rental Income is ideal for the investor who has hit an ‘affordability ceiling’, and/or possibly where credit is telling them to sell an existing property to finance the next one,” says Martins. “Future Rental Income, in many cases, will enable such an investor to purchase their next investment property without having to necessarily sell an existing one. However, it is strictly only available to those who have a minimum of two properties, one of which may be their own live-in property.”

This Absa feature is ideal for buy-to-let investors wanting to build a rental portfolio and "who may have hit a ceiling in their affordability and need a little bit extra to overcome that hurdle”, says Martins. Introduced by Absa to the South African market in 2018, the facility is strategically named because it considers the investor’s ‘future rental income’ from buy to let properties, including it in the qualification of ‘evidence of income’. This has the potential to elevate an investor’s ability to secure finance for the purchase of a third or more properties.

It also displays Absa’s confidence in the residential property market and buy-to-let purchasers. “Those applying also don’t necessarily need to be individual property owners either, as the facility is also open to trusts and companies that own properties,” says Martins.

Understanding that property acquisition depends on investors’ affordability and where they find opportunities, Martins confirms that the most popular average value of property purchases of this nature is R1.1-million. However, we are seeing a lot of interest and activity around both the R750 000 and R1.5-million value ranges.

“I emphasise that investors’ individual strategies vary but, in principle, the guideline in wealth creation through property acquisition is to achieve a minimum of around 15 percent return on the cash invested in purchasing or renovating a property.” Martins provides an example of such a strategy: “If an investor puts R60 000 into transfer fees, and R40 000 into the repair of a house, the aim should be to at least realise R15 000 net rental profit per annum, after taking the home loan repayment, levies and other such costs into account. That 15 percent is generally, as said, the ideal minimum, but there are some savvy investors achieving far more than 15% return.”

There are also several tax implications when it comes to property investing, many of which are beneficial, but, says Martins, it is always advised to engage with a tax accountant who can provide guidance on these matters. “However, there are no tax implications directly associated with the utilisation of Future Rental Income as this facility benefits the affordability in the home loan application.”

The application itself is relatively painless. As is usual, the applicant completes a home loan application form, which always includes a section requiring information about the applicant’s various incomes, such as salary, rental income, investment returns etc. Future Rental Income is included under ‘Other’ income, and investors are asked to specify what that is likely to be. This is usually based on what similar properties in the area are being rented for, the condition of the property and features that make it desirable. This future rental income estimate is checked by the Absa credit team that assesses the home loan application.

The Future Rental Income application is available online via Absa’s website or through Absa’s property finance specialists. In addition, Absa origination partners are also well aware of the service and can assist applicants.

“A general rule of thumb, established over decades, is that it is never a bad time to buy an investment property, provided the correct skills are engaged, and the investor has the right knowledge to do so. There are an extraordinary number of online facilities that serve to educate and inform about the potential wealth that can be created through property acquisition. However, what has to be borne in mind is that market shifts can affect the property value, so while the number of opportunities may increase, so too do the risks,” says Martins.

SOURCE: www.privateproperty.co.za

[superstarstrategies]

FLISP policy revised | 'No need for a home loan to obtain government subsidy'

National Minister of Human Settlements, Mmamoloko Kubayi announced that the Finance Linked Individual Subsidy (FLISP) has been delinked and is no longer just a mortgage only option.

Furthermore, partnerships were established with external role-players such as financial institutions, conveyancing attorneys and property developers, granting them access to the Housing Subsidy System (HSS) which allows them to capture and monitor the progress of applications. The result is a drastically improved turnaround time for processing these applications.

The FLISP programme is a housing subsidy to assist qualifying first-time home buyers with purchasing a home. The subsidy is paid directly to the conveyancing attorney or financial institution and can be used as a deposit to buy a home, or to pay such into an existing home loan and reduce the monthly instalments.

“Households with an income between R3 501 to R22 000 may qualify for the FLISP subsidy if they meet all the criteria, such as being a first-time buyer with a financial dependent and a South African citizen. The current subsidies range from R121 626 to R27 960.00. This may also increase,” says Meyer de Waal, a conveyancing attorney of Cape Town whose mission it was over the past eight years to assist first time buyers to gain access to a home loan and assist with a FLISP subsidy application.

“Since FLISP’s inception in 2005, the approval of the subsidy was always linked to finance in the format of an approved home loan from either one of the major financial institutions such as ABSA, Standard Bank, FNB, Nedbank or SAHL.”

“The announcement by the National Minister of Human Settlements, Mmamoloko Kubayi during a virtual briefing to National Council of Provinces (NCOP) that as from 1 April 2022, the Finance Linked Individual Subsidy (FLISP) has been delinked and no longer just a mortgage is the only option, is a very welcome development,” says de Waal.

“Often in the past, we considered giving up as the barriers to entry for a first-time buyer were too difficult to overcome,” says de Waal.  “We welcome Minister Kubayi’s announcement, and are glad that we persevered and today can provide a comprehensive FLISP first time buyer assistance that includes home loan and or non-mortgage linked finance application services.” 

According to de Waal, partnerships in the private sector were established over the past years, and these are now the foundation of a comprehensive service to first-time buyers mortgage originators, attorneys, estate agents as well as such service to the Department of Human Settlements and the NHFC to provide comprehensive FLISP application submissions.

Establishing partnerships in the private sector to aid first time buyers

“We reached out to other industry stakeholders in the legal fraternity, such as LexisNexis and formed a partnership with them to promote FLISP applications through their extensive conveyancing attorney network,” explains de Waal.

“Through the Gawie Le Roux Institute of Law we also hosted FLISP information sessions and more combined workshops are planned.”

The Attorney Realtor Hub, through 13 branches on a national scale are also assisting their buyers and sellers with this service.  

Up to 31 March 2022, only the Western Cape allows for the payment of conveyancing fees from the FLISP subsidy proceeds, says Chris Fick of Attorney Realtor Hub.

Often a buyer does not have the funds available to pay for conveyancing fees and the new FLISP policy will be expanded on a national level to accommodate the payment of conveyancing fees as well.

Estate agents

FLISP information sessions and events facilitated through the Institute for Estate Agents (IEASA) were hosted and further events are planned.

“The estate agents must have comprehensive knowledge of the subsidies available for first time buyers as this aids them in concluding a successful property transaction,” says Annette Evans of IEASA.

Technology

To accommodate the onboarding of thousands of home loan applications per month, cutting-edge Property and Fintech technology were developed in a partnership with 4Me.Tech. This same technology is now applied to aid buyers with non-mortgage-linked financial applications and a FLISP subsidy.

What changed?– the new de-linked flisp policy as from 1 april 2022

As from 1 April you no longer need a finance approval from one of the major financial institutions, explains Anele Matakane of MDW INC property & home finance services.

Now, a buyer can qualify for a first-time buyer FLISP subsidy if they have financial assistance to buy a property in the form of:

·         The beneficiary’s pension/provident fund loan.

·         A co-operative or community-based savings scheme, i.e. stokvel

·         The Government Employees Housing Scheme.

·         Any other Employer-Assisted Housing Scheme.

·         An unsecured loan.

·         An Instalment Sale Agreement or Rent-to-own Agreement.

“Our mortgage origination license with one of the largest mortgage origination companies provides financial assistance to up to eight traditional home loan lenders,” says Matakane.

This also includes non-mortgage finance which is a unique offering to the industry.  All the property finance solutions are under one roof.

“For non-finance linked applications, we have taken hands with 4.Me.Tech to provide a one-stop-shop service to assist buyers with every type of finance solution available, all such types of finance that are now available with the National Housing Code.”

What about late applications or existing home owners?

Unfortunately, many first-time buyers did not know about the opportunity to apply for a FLISP subsidy and never applied. However, this may now change with the new policy as retrospective applications may be considered as soon as the new guidelines are made available.

To add your name to a list to be advised when the retrospective policy is introduced, click here to add your name and details.

Flisp calculator and flisp pre-qualification voucher before you buy

As per the new National Housing Code, a FLISP pre-qualification guarantee can be issued to a first-time buyer by the Implementation Agencies appointed by the Government.

According to Jacques Theron of 4Me.Tech, their technology enables them to issue a first-time buyer with a FLISP Voucher before they start the home buying process.

“After an applicant signs up on our online platform and answers a few qualifying questions, the technology does the rest and a FLISP Voucher is issued to provide an accurate estimate of the subsidy the home buyer can qualify for.”

The Flisp Voucher can then be validated through HSS integrations with the Department of Human Settlements or the systems of the NHFC as per a working relationship with these institutions.

Next step – what finance can one qualify for?

A FLISP Voucher is the first step to take, and the first-time buyer can then establish how much finance can be obtained to buy a home with the combination of the FLISP subsidy and the finance granted and available.

“Our online property finance pre-qualification estimator provides an outcome in real time and also provides a FLISP Subsidy Voucher that can be validated,” says Jacques Theron of 4Me.Tech.

Not only is the first-time buyer assisted to compare finance through a home loan, but also to all of the non-mortgage linked financial services that will be available as from 1 April.

“We realised a first-time buyer, with no or little experience to buy a property and shop around for the most appropriate property finance will be very confused if all the finance options are not presented on one easy to navigate platfor,” says Theron.

“The first-time buyer can also be lured to take up non-mortgage finance that he or she may not be able to afford. Once the finance is taken up and a home bought, it may land the new homeowner in financial difficulties if the monthly repayments cannot be met.”

That is why the online platform with a quick credit score and affordability self-check for the buyer was developed.  The outcome is available in real time and the data extracted from a business relationship with an established credit bureau, explains Theron.

Raising finance, in any form, is a home loan or non-mortgage linked finance application, a first-time buyer will still have to comply with the strict rules of the lending practices and guidelines as per the National Credit Act.

“Up to 50% of home buyers are unsuccessful from the start due to a low or a bad credit score,” says de Waal. “If I look at the +/- 340 000 applications who were processed over the past 36 months, more than 185 000 aspiring buyers were unable to even be considered for a home loan, due to a low, thin, or bad credit score.

If a finance application is declined, a first-time buyer will not be able to receive a FLISP subsidy.”

“Thanks to a partnership with My Budget Fitness, we can enable the first-time buyer with a low, thin, or bad credit score to receive assistance to improve his or her credit score and get back to apply for finance as soon as the credit score is strong and healthy,'' says de Waal.

“This service has already been made available since 2017 to a leading financial institution that specialise in unsecured lending, as assistance for their own employees.”

“We are elated that the rent-to-own concept and installment sales were also added in the National Housing Code,” says de Waal.

The Rent2buy programme was developed in 2007 and is geared towards helping first-time buyers to get their foot in the door to own their own homes. A year or two later, installment sales were also added to aid buyers to get their foot in the door to own their own properties.

Private partnerships were established with property development companies such as Sinai Property Developers and Communicare to aid first time buyers to own their own home, and more property development companies are expected to follow and make available their stock to these types of innovative property solutions.

“We already have access to non-banking finance available for buyers who struggle to convince a traditional bank to grant them a home loan,” says de Waal.

SOURCE: www.property24.com

[superstarstrategies]

Prime lending rate increased to 7.75%

For the second time this year, the South African Reserve Bank's Monetary Policy Committee increased the repo rate by 25 basis points to 4.25%, bringing the prime lending rate to 7.75%.

Three committee members voted for the announced increase, and the other two members suggested a 50-basis point rise in the repo rate.

In his statement, the South African Reserve Bank Governor Lesetja Kganyago said that, given the inflation forecast, the implied policy rate path of the bank's Quarterly Projection Model (QPM) indicates gradual normalisation through to 2024.

"As usual, the repo rate projection from the QPM remains a broad policy guideline, changing from one meeting to the next in response to new data and risks," said Kganyago.

The governor said the SARB's forecast for global growth in 2022 is revised down to 3.7% - from 4.4% - and for 2023 is lowered to 2.8% - from 3.3%. This is as a result of the war in Ukraine and the ongoing spread of the Covid virus in Asia and elsewhere. For 2024, expected global growth is unchanged at 2.7%.

"Dramatically higher oil, commodity and food prices, additional constraints to trade and finance, and rising debt costs, create more adverse economic conditions for most emerging and developing economies," said Kganyago.

Industry comment

"The MPC's decision was in line with predictions from most economists, who expected a slow and steady rise in interest rates as the SARB attempts to normalise the aggressive cuts that were made early in the pandemic," says Tony Clarke, managing director of the Rawson Property Group.

"Global economic conditions have also become a lot more complicated with the war between Russia and Ukraine. Factors such as global supply chains, food production and fuel prices will inevitably put pressure on inflation in several countries, including South Africa. An adjustment to the repo rate is one of the few mechanisms the SARB has for managing inflation, so we believe further increases are on the cards."

Chas Everitt International property group chief executive, Berry Everitt, says the fact that the economic growth forecast for SA was raised to 2 percent this year from 1.7 percent just two months ago should, in due course, translate into more employment opportunities.

"At the same time, the rand has been strengthening in anticipation of the repo rate increase, and this will help to contain the "imported inflation" that SA experiences due to higher global prices for fuel and basic foodstuffs. This will hopefully bring some relief to the many households already struggling to make ends meet."

Gerhard Kotze, managing director of the RealNet estate agency group, says the 25-basis point increase takes account of the difficulties many households are already facing due to steeply rising fuel, food and utility costs.

Pam Golding Property group chief executive, Dr Andrew Golding, says that by increasing the repo rate by a moderate 25 basis points for the third consecutive MPC meeting, the SARB endeavours to normalise interest rates in line with its stated strategy. This is amid a resurgence in inflationary pressures and a lukewarm economic growth outlook.

"Although we would have preferred an unchanged repo rate, this moderate approach has in all likelihood already been factored in by the housing market," says Golding.

"Attempting to tighten monetary policy to dampen price pressures without derailing the economic recovery was already challenging. Now the war in Ukraine has created further uncertainty and financial market turmoil. This, together with the West's sanctions against Russia, has sent global commodity prices soaring while surging food and energy prices, in particular, have forced local analysts to revise their inflation forecasts."

Chairman of the Seeff Property Group, Samuel Seeff says: "We had hoped for a pause in interest rate hikes to provide some reprieve for homeowners and buyers who are facing rising costs. However, we believe the market is now well aware that the rate is stepping up this year to counter inflation and to normalise it after the sharp rate cuts in 2020.

"Although the market is taking the rate hikes in its stride and we continue seeing strong activity as we come out of one of the best summer sales seasons, there is no doubt the rising interest rates are beginning to pinch. Households and homebuyers will need to adjust."

RE/MAX of Southern Africa regional director and chief executive, Adrian Goslett, says South Africans will have to tighten their belts over the next few months.

"Rising fuel and food costs as well as higher debt repayments resulting from the latest interest rate hike will undoubtedly put pressure on household budgets," he says.

However, he believes South Africa could be poised for growth if it positions itself well to fill the global supply/demand chain gaps.

"Exports already increased by 8,5% in the fourth quarter of 2021, and this stands to increase further in 2022 if the correct opportunities are seized. The SA housing market also poses an appealing option for foreign investors who wish to diversify their portfolios to limit risk in an increasingly chancy global economy."

Home loans

This is the third interest rate hike since November last year, and it means that the minimum monthly repayment on a new 20-year home loan of R1 million at prime will now be around R450 more than it would have been six months ago.

Kotze says it also means that buyers applying for a R1m loan now will need to earn around R1 500 a month more to qualify than if they had applied six months ago.

"This may be difficult in SA's current low-growth economic environment, where many companies and organisations are struggling to retain staff at their current salaries," he says.

"The alternative would be to buy less expensive properties. For this reason, we expect to see increased demand in the lower price bands of the property market, where there is already a severe shortage of stock. This will, in due course, place upward pressure on prices, although sellers should be aware that buyers are very value conscious and will not overpay - even in multiple offer situations."

Everitt says that on a home loan of R2 m at prime, the new interest rate will add about R300 to the monthly instalment.

"Being the third such increase since the MPC meeting in November, this means the repayments on a R2 m loan have increased by more than R900 in the past six months," says Everitt.

"Because more interest rate increases are no doubt on the way this year, our advice to existing homeowners is to keep paying any spare cash they have into their home loan accounts to reduce the capital balance - and the required minimum monthly payments."

He says first time buyers will need to be very careful now not to overcommit themselves financially.

"It's important to take future bond rate increases into account when calculating what you can afford to buy. It would be helpful to obtain pre-qualification through a creditable bond originator and to work with registered and qualified estate agents to find suitable properties that match your budget."

Impact

Golding says the residential property market is holding up well, showing steady activity across all price bands, despite the recent increases in the interest rate and the unfavourable economic influences.

"The Pam Golding Residential Property Index shows that price growth has now peaked in all major regional markets, with the Western Cape recording the strongest growth rate of 6.3% in February 2022, followed by 5.4% in KwaZulu-Natal and 4.2% in Gauteng," says Golding.

"This compares with a gradual slowdown in national house price inflation which eased from a mid-2021 peak of 5.89% to 4.5% in February 2022. It is estimated that after averaging 5.6% last year, national house prices are likely to increase by 3 to 4% in 2022."

Seeff is not expecting the increasing interest rates to dramatically impact the housing market. He says that sales volumes appear to have tapered from 2021's highs, as most of the pent-up demand has now been absorbed. Regardless, he says the market is still trading above pre-pandemic levels and the outlook remains upbeat.

"At 7.75%, the prime rate is still well below the 10% level of early 2020 before we entered the pandemic. It is generally still cheaper to buy than rent, leaving you with a valuable asset and a secure roof over your head," says Seeff.

Clarke says: "We've successfully weathered far higher interest rates than 8.5%. It's definitely a good time for home owners and prospective buyers to re-examine their budgets and cut unnecessary expenses. However, we don't expect too much reduction in market activity and property price growth."

He says that financial stability is going to take centre stage, with pre-qualification becoming an essential tool for buyers.

"Getting prequalified helps improve your chances of having an offer accepted, and also provides an opportunity to prime your financial profile for preferential mortgage rates. That could go a long way towards lessening the impact of rising interest rates in the months to come."

SOURCE: www.privateproperty.co.za

[superstarstrategies]

Preparing your home for listing photos

Most buyers begin the house hunting process online, so it is imperative for sellers to make a good first impression with their listing photos.

“Buyers will rule out options based on the listing photographs alone, so it is worth putting some effort in to make sure the house looks as appealing as possible in the listing photographs,” says Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett.

The first way sellers can achieve this is by hiring a professional photographer to take the best possible images of the property. Most real estate agents will recommend a photographer that sellers can use in this regard and will schedule the photoshoot on the seller’s behalf.

The reason so many real estate agents choose to do this is because photographing a room is far more complex than it seems. “If caught at the wrong angle, rooms can appear smaller than they actually are. Without the proper lighting, the home could also appear dark and dingy. That is why it is better to involve a professional who knows how best capture the features of the home,” Goslett explains.

Before the photographer arrives, RE/MAX of Southern Africa suggests a few steps sellers can take to help make the home appear more appealing in the listing photographs.

Boost Curb Appeal

To help make the home’s exterior more enticing, sellers could add pops of colour by planting something that is in bloom or by adding a few pot plants. Sellers should also make sure the area is as clean as possible by removing all pet waste, sweeping the driveway, clearing away loose leaves, trimming overgrown vegetation, and pulling out any weeds.

Interior preparations

Dirt and clutter shows up in professional photographs, which is why sellers are advised to sweep, vacuum & mop the floors before the photographer arrives. Sellers should also remove any visible garbage, clean kitchen surfaces, scrub the bathrooms, pack away clutter and personal belongings, and ensure all beds are made. To avoid becoming a target for potential burglars who might spot the home online, it is also advisable to conceal any valuable items. Sellers should also turn on all lights and open all curtains to ensure that the listing photographs are well lit.

Retouch dated features

Those who have a little more time on their hands should retouch any chipped paint on the walls, repaint yellowing ceilings, update outdated fittings, and fix any loose door or cupboard hinges. These small and often inexpensive updates can do wonders at improving the overall appeal of the home. As a bonus, fixing these items also leaves less for buyers to haggle down the asking price on.

“Preparing a home for listing photos is a necessary step to ensure that the home sells quickly and for full value. If you are unsure of the steps to take to ready your home for sale, consult a local real estate professional who can provide some free advice on the topic. Their experience can prove invaluable, as they will know what buyers are looking for in the area and can advise on what features are worth updating and which can be left as is. This can save homeowners money on unnecessary renovations and will also help them achieve a higher asking price,” Goslett concludes.

SOURCE: www.privatepoperty.co.za

[superstarstrategies]

Interest rates guidelines for first time home buyers

"With interest rates on the rise, some first-time buyers may be grappling with whether this is still a good time to buy a property in 2022,” says Zydah Manuel, Portfolio Manager First Time Home Buyers at Absa. And her point is valid.

Further increases in each quarter of 2022 up to 2024 are expected to account for inflation and other risks. However, this gradual rise in the repo rate will be sufficient to keep inflation expectations well-anchored and moderate the future path of interest rates, says the South African Reserve Bank Governor, Lesentja Kganyago. It is, in other words, all about the future, and for first time home buyers, who either own or intend to own property in the forthcoming months, there are questions about affordability and whether the market will be conducive for property investment.

“If we look at last week’s Budget announcement, Minister of Finance Enoch Godongwana announced some tax relief to boost investment and consumer spending. But, this also means consumers will need to review their budget to ensure there is affordability to purchase and maintain a home, and sufficient surplus to factor in the projected interest rate hikes and other associated homeownership costs,” says Manuel.

For those first time homeowners, who may find themselves financially stretched, it is concerning, but Absa has relevant solutions to support customers. For example, short-term payment plans on home loans allow for the monthly repayment to be reduced for 3 to 6 months, or the option of a long-term payment plan that extends the loan period by reducing the monthly repayment. “Terms and conditions apply,” says Manuel, “but consumers cannot wait until they are on the brink of financial collapse to engage these options.”

This is but one of the many common mistakes some first time home buyers make, along with not ensuring their credit record with credit bureaus remain sound.

So, is 2022 still a good year for first time home buyers to purchase a property, regardless of incremental interest rate hikes?

Manuel believes so, provided one’s financial circumstances and affordability allow for additional credit. Buying a home is probably one of the single-largest purchases many of us will make in our lives. As a customer, it is essential that one is realistic and works closely with one’s financial institution to assess affordability.”

However, the residential property market has remained resilient through Covid-19 and its lockdowns and is still very active. This means that most prospective buyers are still in a situation of realising the purchase of a home, but what they can afford is not necessarily what they aimed for, says Manuel.

“It helps that Transfer Duties are still exempted for properties below R1-million, and there is also the option of the FLISP government subsidy for first time home buyers, which is really an enabler for consumers to enter the market. This is excellent news for, for example, young families looking to move out of rental scenarios.”

Manuel also makes the point that some consumers may be the first generation in their family to enter university or formal employment and wish to provide a home for their extended family. “Entering the market as a first-time homeowner means you are engaging the potential to become a repeat buyer or property investor by diversifying into growing a property portfolio,” she says.

Absa is well geared to assist with the credit loan process associated with home loans, which is not as onerous as many first time homeowners imagine. Not only is there a number of educational and enabling pre-buying tools, but there are also a variety of home loan propositions to address the specific needs of consumers, and all are available on the Absa website.

·         First-time buyers may be eligible for a 50% discount on bond registration costs, preferential interest rates, and young professionals may obtain a home loan of up to 105% (terms and conditions apply).

·         Applications are made easy by applying for a home loan online on the Absa website, where speed and simplicity are assured for single or joint applications.

“But do your homework,” advises Manuel. “Make sure you have engaged the pre-qualification tool and the bond calculator; that you have an accurate budget that accounts for future hikes in costs; have a good credit history and score; and have knowledge and understanding, which can be acquired through Absa Knowledge Hub Centre. Ultimately, we want to help first-time homeowners enter the market and secure an asset for themselves and their families’ future. Our consultants are available on [email protected] to answer questions and assist with the journey to becoming a homeowner for the first time.”

SOURCE: www.privateproperty.co.za

[superstarstrategies]

How do you know you are ready for homeownership?

Zydah Manuel, Portfolio Manager for First Time Home Buyers at Absa, reveals her ‘Top 5’ knowledge indicators, tips and guidelines around how to prepare for owning your first home.

Q: What are the signs that ‘you’ are ready to own your first home?

This is an excellent question because so many people put themselves on a path of thinking homeownership is unaffordable, something only achievable in 5/10 years, or only when the time has come to plan a family. However, depending on individual circumstances, there are often strong indicators that you may be ready right now.

One: Your financial circumstances are such that you can service a long-term debt over 20 or 30 years, and your budget and home loan pre-qualification indicate your level of home loan repayment affordability.

Two: You have enough savings for a deposit on a property and associated costs of homeownership, and you understand the financial liabilities associated with homeownership.

Three: You have a good rental history and are committed to paying credit commitments timeously.

Four: Your risk profile and credit history are such that your credit score from three credit bureaus strongly indicate you are eligible for a home loan.

Five: You are ready to commit to staying in one place for a substantial amount of time, or if investing, you are prepared for the security and stability of a fixed asset, and you want to expand wealth creation through property investment.

Q: What should be given priority in prepping to own a home?

One: Understanding how to budget to ensure property ownership is affordable and sustainable.

Two: Reducing unnecessary expenses now to cater for a new home's expenses. These include levies, insurance, rates and taxes, electricity, water, and extra savings for maintenance or unexpected homeownership challenges.

Three: Savings enough for a deposit and all associated costs in the buying process. For example, attorney fees, registration and moving costs.

Four: A strong credit score, which requires consistent and timeous repayments of credit loans and closing any past negative credit issues. Five: Understanding of 'offer to purchase' agreements as these clearly define the rights and obligations of each party in such legally binding contracts.

Q: What are the pitfalls to homeownership, and how do you overcome those?

Buying a home is a life-changing decision, and as such, anxiety levels can rise during the buying process. A potential buyer will question every step of the journey, whether it's the right property, time, decision, etc. But, most importantly, it's a common theme throughout the lifespan of property ownership: affordability in the long term!

One: Affordability - not checking and understanding affordability and the impact of a credit record before entering the buying process.

Two: Pre-qualification - not having completed a pre-qualification process with a reputable financial institution to measure and ensure on-going affordability of a home.

Three: Research area - not finding out enough about the neighbourhood and whether its services support your lifestyle needs.

Four: Attorney costs - not having saved enough to pay for bond registration, transfer costs and other affiliated home acquisition expenses.

Five: Other expenses - not making provision for hikes in interest rates, municipal rates and taxes, maintenance and insurance.

 Q: What are your top 5 tips when researching for a first home?

One: Location - is it suitable for your lifestyle?

Two: Suburb - examine suburb property reports. Explore the property valuations in the area and estimated rates and taxes, security, amenities and urban planning schedules.

Three: Property type - Clearly understand the benefits and/or needs of the type of property you are interested in. This includes whether you want freeholder ownership, estate living or sectional title, for example. The latter two are popular because of their cost-effectiveness, heightened security and community living. They also remove the responsibility of paying individually for building insurance, for example, upkeep of communal areas, which, compared to freehold, can become burdensome on the owner.

Four: Buying process - research and understand the buying and lending processes before entering the marketplace. Ask your bank or financier for a step-by-step process guide.

Five: Budget - be clear on your budget restrictions and ensure all potential home ownership related costs are accounted for.

Q: What value statements are engaged when owning a property?

One: Building equity - your equity is the difference between what the property can be sold for and what you still owe. Equity grows as you pay down your mortgage. So over time, more of what you pay monthly goes to the balance on the loan rather than the interest, which builds more equity.

Two: Diversifying wealth creation through property purchases - owning a home offers the long-term benefits of security and potential growth in personal wealth.

Three: Stability - people tend to stay longer in a home they buy only because buying, selling and moving is complex. Choose confidently and carefully so that your property decision can serve you for years to come.

Four: Building credit - owning a home can strongly contribute to an individual’s credit worthiness.

Five: Personalisation, a sense of security and belonging - a homeowner has creative control over the property owned. You can alter the property, including decor changes, landscaping and renovations to suit your needs and lifestyle.

 Q: What tools does Absa provide to help its client’s confidently approach homeownership?

While most banks assist with the credit-lending process, Absa also includes educational and enabling pre-buying tools and various home loan propositions. All can be accessed through the Absa website - www.absa.co.za. Here are my top five tools:

One: The Absa Home Loan Pre-qualification tool is a quick and straightforward way of discovering what Absa may lend customers before they start searching for a home.

Two: The Absa MyHomeOwnerJourney is a free e-learning platform that can help first time home buyers understand the ins and outs of homeownership and answer all the pressing questions before making such a big decision.

Three: The Absa Knowledge Hub Centre. A visit to this knowledge hub centre reveals many articles that answer the most frequently asked questions about buying a property.

Four: Absa Bond calculator. This calculator factors in the registration charges, transfer costs and attorney fees involved in taking out a new home loan and calculates the actual costs.

Five: The Absa Home Loans Digital Sales Platform (Home Loans DSP) enables you to apply for your home loan online with simplicity and speed, whether it’s a single or joint application. DSP is accessible from the absa.co.za website and gets the process going in record time, on any device, at any time. Customers can apply via absa.co.za/homeloan online where they can complete their application in under 15 minutes.

The guidelines provided above should be sufficient to evaluate your readiness to have a home.

SOURCE: www.privateproperty.co.za

[superstarstrategies]

Q4 Vacancy Survey indicates it is still a tenants market

Landlords continue to be under pressure as a result of an increased vacancy rate of 11.71% in the last quarter of 2021, according to the TPN Vacancy Survey for the fourth quarter of 2021.

Vacancy rates at the height of the pandemic were over 13% during December 2020 and in the first half of 2021. However, they dropped to 10.66% in the third quarter of 2021.

Civil unrest in July 2021 resulted in a sharp rise in unemployment with a total of 660 000 jobs lost in the third quarter of 2021. This resulted in reduced demand for rental property, reveals Michelle Dickens, CEO of TPN Credit Bureau.

“The international travel ban imposed after South African scientists identified the Omicron variant in December 2021 has translated into an even bigger increase in available long term rental stock and exacerbated the vacancy rate,” she says. “The ban on travel to South Africa negatively impacted on short term rentals in December 2020, some of which are likely to be converted into long term rentals in 2022.”

The tourism industry typically operates at 50% capacity. In the month preceding the hard lockdown in March 2020, total tourism sector occupancy was 47.6%. This effectively dropped to zero in April 2020 – the Easter holiday month – with occupancy at a mere 1.2%. The road to recovery for the tourism sector remains elusive as total occupancy levels had recovered to just 30% in October 2021.

Although the lifting of the three-week ban on international travel to South Africa in mid-December was a welcome relief to the tourism industry, the disruption to their businesses in what is usually their busiest month with the highest occupancy rates, will be devastating for some operators.

TPN’s Vacancy Survey reveals a market strength index of 51.93. Dickens cautions, however, that this survey was performed prior to the December international travel ban which is likely to have caused some deterioration in demand, forcing short term rentals back into the long term rental market.

A closer look at the provincial breakdown of the Vacancy Survey reveals that tenant demand for rental property in Gauteng is back to pre-pandemic levels at 57.21%, supported by 66% of households who receive a salary as their main source of income.

“Gauteng is home to nearly half of all tenants in South Africa with 2.8 million households renting in this booming province,” reveals Dickens.

However, supply of rental property in Gauteng remains stubbornly high with a supply rating of 74.77. “For Gauteng landlords, this translates to an over-supplied rental market with a market strength index of 41.22,” says Dickens. “Although this is an improvement from the 39.31 recorded in the third quarter of 2021, an over-supplied market means the vacancy rate remains high at 11.9%.”

Western Cape, the second largest province hosting 738 000 tenanted households, is the province with the highest level of salaried households at 68%.

According to Dickens, tenant demand in Western Cape is improving at a rate of 63.01 coupled with an improved supply rating of 59.16. “This puts Western Cape back in the positive position of excess demand for rental property with a market strength index of 51.93,” says Dickens. “Western Cape landlords benefited from the improvement in tenant demand with the province’s vacancy rate declining from its high of 14.38% in the second quarter of 2021 to 11.4% in the fourth quarter of 2021.”

KwaZulu-Natal has 664 000 households in rented accommodation. Households in this province rely equally on salaries and social grants. A total of 9.34% of rental properties were vacant in the fourth quarter of 2021, driven by a deteriorating demand rating of 56.34 and a slightly increased supply rating of 57.04, causing the market strength index to slip into excess supply territory with a rating of 49.65.

The Eastern Cape is home to 427 000 tenanted households. A total of 64% of households in the province are supported with social grants, highlighting the desperate reality that only 46% of households receive a salary. A lack of property development leaves this province with a low supply rating of 53.17 coupled with a demand rating of 62.7, which translates into a market strength index of 54.76. High demand means lower vacancies of 8.2%.

One of the big take-outs from TPN’s Vacancy Survey for the fourth quarter of 2021 is that tenants remain highly price sensitive.

Although landlords will be feeling a measure of relief that rental escalations finally turned positive in the third quarter of 2021, the 0.4% increase in rent per annum is insufficient to cover inflation and higher property expenses on top of interest rate increases. The overall market strength index strengthened to 47.2 which indicates that this is still a tenant market struggling to claw its way back to 50, a figure which would indicate a market in equilibrium with sufficient supply to meet demand.

Writer: Michelle Dickens

source: www.privateproperty.co.za

[superstarstrategies]

Buying a sectional title property

Sectional title units have become more popular than freestanding homes in the past few years. This is due to the rising costs of maintaining a property and the added security usually provided in sectional title complexes.

In addition, sectional title units tend to be more affordable than similar freestanding properties. As a result, the number of sectional title schemes being developed around the country is increasing.

However, owning a unit in a sectional title complex differs from living in a house. Therefore, prospective buyers need to consider several factors before signing an offer to purchase.

Joint ownership

Each sectional title unit is one section of a complex, which all the unit owners jointly own. Some units do come with rights to use a particular area exclusively, for example, a section of the garden or a parking area. However, the unit owners do not own these areas - they remain part of the common property.

Once the ownership of the units is transferred from the developer, the owners become members of the body corporate of the complex. This entitles them to vote at body corporate meetings and have a say in how the scheme is run.

It is in the best interests of all owners to be involved in all that happens in the complex. However, if you would prefer not to be involved with close neighbours, you might be better off buying a freestanding property where you can keep pets and make alterations as you please.

Management

Since 2016 the sectional title schemes management has been governed by the Sectional Titles Management Act (No 11 of 2011), which amended the original Sectional Titles Act 95 of 1986.

The rules governing sectional title schemes are the prescribed management rules and the conduct rules. Management rules direct the efficient running of the sectional title scheme and include administration, accounting, insurance, elections, meetings, levy budgeting and collection. A unanimous vote can only change them from all the owners at a general meeting.

Conduct rules govern owners and tenants, and they deal with issues such as noise levels, pet ownership, parking and general behaviour.

At the annual general meeting, body corporate elects trustees to manage the finances and run the day-to-day affairs of the sectional title scheme.

Finances

Budgets for any scheme depend heavily on all members paying their levies on time and in full every month so that the scheme can meet all its financial obligations. Therefore, unit owners may not withhold levy payments for any reason whatsoever – even if they may be dissatisfied with the management.

Levies are the lifeblood of any scheme, and withholding payments leads to additional administration, not to mention a strained relationship with other owners who pay their levies on time.

Without proper budgeting, the body corporate won't be able to pay its bills, nor will it be able to keep the buildings and facilities in good condition. Over time, the complex will become rundown, and the units will lose value.

There are three categories of levy:

·         Monthly levies cover ordinary operating expenses such as staff salaries, and all members are liable to pay these every month.

·         Exclusive use area levies are payable by the unit owners who have exclusive rights to certain areas.

·         Special levies are used for larger items that weren't budgeted in the annual budget. All unit owners are liable to pay these as and when they arise.

Considering buying a unit in a scheme? First, it's essential to check the financials to see that everything is in order – particularly the issue of adequate maintenance. If not, you may be faced with finding additional funds if a special levy needs to be called for in future.

Conduct rules

In most sectional title schemes, the conduct rules are usually the ones that prevent some buyers from putting in an offer to purchase.

Some examples of conduct rules include:

·         Alterations to units. This is not allowed unless the trustees have granted permission. Changes may not be made to common property, and if the modifications to a unit affect the common property, they may not be carried out.

·         Pet ownership. Some schemes don’t allow animals – or prohibit the ownership of certain animals. You cannot assume that you will be allowed to keep pets or that the type of animal you own is allowed.

·         Vehicles and parking areas. These are often contentious issues. For example, owners and visitors may not drive too fast or park in bays that are not allocated to them.

·         Signs or notices on buildings are forbidden unless the trustees have permitted for them to be displayed. This includes For Sale or To Let signs.

·         Washing may not be dried in areas not explicitly allocated for this use. Owners often hang out washing to dry on balconies, not realising this is an infringement of conduct rules.

·         Refuse removal. Some complexes have specific disposal procedures, for example, the difference between normal wet and recycling refuse. There may also be certain days when the refuse must be put out for collection.

Conclusion

Living in a sectional title scheme can be a great experience – and a good investment - provided the complex is well-run and has a healthy communal environment.

Sharing expenses such as security and lifestyle facilities like gyms or swimming pools make it a good option for a modern lifestyle. But before you place your signature on the dotted line, you need to be sure that you can comfortably live according to the rules and in harmony with your neighbours.

SOURCE: www.privateproperty.co.za

[superstarstrategies]

Experts say South Africa’s housing market will level out in 2022 – here are other trends to look out for

The recent interest rate hike, growing limited inventory for buyers, higher prices, and the continued flexibility to work remotely will see the housing market level out in 2022 from the growth experienced in the past year.

Although things might level off a bit, it by no means will turn down, the growth in property prices and trends like first-time homebuyers joining the property market will continue, said Antonie Goosen, principal and founder of Meridian Realty.

“With the South Africa Reserve Bank (SARB) recently hiking the repo rate by 25 basis points to 3.75%, placing the prime lending rate at 7.25%, the first repo rate hike in nearly three years, there will be some pressure on homeowners, but it would be premature to increase rates again in 2022.

“South Africa’s economic outlook is not looking strong, with the July unrest, the pandemic and ongoing energy supply constraints still having negative effects on investor confidence and job creation. The hike in the repo rate might have been premature, inflation was flat for the past couple of months, and we need the repo rate to stay at low levels to support growth in the economy.”

Globally central banks are supporting economic growth and I am hoping that the SARB does the same in 2022 and that we will not see another hike in the repo rate, said Goosen.

He noted that if the prime lending rate stays at the current levels, and employers continue to give the flexibility to work remotely, there will be continued demand for home buying.

“Also, the ability of some to work from anywhere and the pursuit of a better work-life balance, will allow for the trend of people opting to relocate their families out of cities to smaller towns to continue in 2022. Housing stock shortages in the preferred new places will then also continue.”

Sonja Thielen, property specialist for Meridian in the Stellenbosch area, said she is seeing pace of sales in 2021 beginning to cool and that home buying will level off, but it will help to increase the number of homes for purchase.

With more stock on the market, prices should moderate marginally and the balance between sellers and buyers will normalise. “The higher interest rates could also result in a drop in prospective new purchasers and if inflation does not abate and there is another rate increase, it will take a toll on affordability,” said Thielen.

New trends 

Goosen said he is expecting the trend of new property technology innovations to continue in 2022 and even pick up speed.

“Property tech is starting to transform the industry and many processes will become digital. Already we are seeing the rental property industry starting to change the mindset from being rental agents to becoming rental asset managers,” he said.

“With software available from companies like WeconnectU, they can act like asset managers who have the tools and software to deliver the monitored returns you would come to expect from a financial professional who manages money and securities on behalf of a client, with the goal of growing the value of the assets.”

Goosen said that the trend of digital services will continue to grow and create efficiencies to allow property professionals to focus solely on the interpersonal aspect of the business.

He added that with more millennials becoming homebuyers the trend of touring properties virtually will grow.

“Investments in high-quality photography, virtual tours and short films of the neighbourhood to provide buyers with a true sense of where they will be living, will be a growing trend.

“We will continue to see more investors embracing 3D virtual tours. I think 3D is just scratching the surface of what is possible and in the coming years, I am expecting most properties to have a 3D tour for clients,” said Goosen.

SOURCE: www.businesstech.co.za

[superstarstrategies]

The value of homeowners insurance during the holiday season

Q: Is the end of the year a good time to review [insurance policies][1] and do necessary maintenance to ensure all insured items are in working order?

It is not only necessary at this time of the year, but a review of the homeowners' insurance policy should be done every six months to ensure that a home is adequately covered and that the owner is aware of what is and isn't covered by the policy. Sometimes policies can be onerous to understand. Therefore policyholders must familiarise themselves with the contents of the homeowner’s comprehensive insurance terms and conditions, which are contained in the policy wording and policy schedule.

What is not often understood is that it is the homeowner's responsibility to undertake general routine maintenance and repairs on their property. The policy will not cover loss or damage to your property due to lack of maintenance, and a claim will be rejected if proven so. However, undertaking maintenance and repairs assists in preventing loss or damage to property and aids in maintaining the property value.

If a homeowner renovates or undertakes extensions to the home (for example: transforming a tiled roof to a thatched roof or adding a garage, outbuilding, or swimming pool), it is the homeowner's responsibility to advise the insurer immediately as this could change not only the risk profile of the property but also increase the replacement value and therefore the sum insured, which will have an impact on the premium. Not notifying the insurer of such changes may have an effect at the claim stage.

Q: How has the increase in the interest rate impacted on homeowner’s insurance?

Absa does not apply premium increases simply because the interest rate has changed unless that should happen at the same time as the policy anniversary when premiums are reviewed. Homeowners will be provided notice in writing of the changes applicable to the policy or premium. It is important to note that the cost of building supplies and prices of materials such as steel etc., do impact the cost of claims and the premium at policy renewal. The insured sum will be increased to align with such inflationary increases and affect the property's full replacement value and the sum insured.

Q: What are the most common claims during December?

Traditionally, the summer season brings heavy rainfall and fierce thunderstorms, including hail. These pose the biggest threat to a property and thus increase claims from damage caused by such weather conditions. In addition, geyser failures and burst water pipes are common claims. Although these are common throughout the year, if the property is not occupied, any damage caused by a burst geyser or pipe may be exacerbated. This is why Absa constantly stresses the importance of maintenance, specifically of roofs and gutters, and further ensures a geyser drip tray placement.

Q: Renting out the home (or having the home house-sat) in this period and implications on the insurance policy?

There is no implication from a homeowner’s insurance perspective other than what is usually applicable. All advice given applies equally whether there are legal tenants renting the property or if the policyholder has a house-sitter for a short period of time. There is no stipulation in Absa's policies relative to these scenarios other than the fact that Absa covers properties that are for residential use only, either occupied by the owner or by legal tenants. There is, however, a clause about vacancy and properties that are vacant in excess of 60 days, which introduce limitations in cover, and these are contained within the policy terms and conditions. Absa consultants are always available to explain these terms in simple language, should this be required.

Q: What should homeowners be doing to maintain the validity of their homeowner’s insurance policy during the holiday season?

It is important for customers to take certain precautions during the holiday season, whether they are staying home or will be away, and more so if the property will be unattended. These precautions include:

·         Switching off geysers when they are not required on the mainboard will reduce electricity consumption and will also potentially prevent and alleviate any extensive damage to property should there be any problems with geysers.

·         Hotplates and ovens should be switched off at the wall. If they are unknowingly left on, without the mains switched off, a fire could be the result.

·         Ensuring all taps are properly closed (also when there are interruptions to the water supply) helps to prevent flooding.

·         Switching off major appliances at the wall sockets and removing plugs from wall plug points prevents power surge damage should the main electricity supply be interrupted.

·         Locking and securing the property is a theft deterrent.

·         Roofs require some attendance, such as ensuring debris is cleaned from roofs and gutters and checking that all roof tiles are in place, not loose, or out of position. As temperatures rise and fall, metal roofs expand and contract, loosening screws and washers, which may need to be replaced at least twice a year. Joints and gaps between roof sheets may also need to be resealed for protection against rust. Tiled and slate roofs are prone to cracking and slipping, and these should be repaired to avoid roof leaks and damage to a home's interior. Ensure ridge tiles are secure and any cracked or missing ridge tiles are replaced and waterproofed.

A thatched roof needs to be brushed or combed several times during its lifespan to prolong the life of the thatch. With a thatched roof, it is important to install a lightning conductor, fire retardant and water-drenching system to minimise any spread of fire. The policy and underwriting guidelines are very specific about thatch roofs, so policyholders must make it a point to read the terms and conditions. Overall, regardless of the roof type, Absa recommends the employment of qualified roof specialists for the maintenance of a roof.

A homeowners insurance policy is tailored to protect your possessions and give you peace of mind while you are home and away. As the year ends, reward yourself with peace of mind by securing cover.

SOURCE: www.privateproperty.co.za

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Security tips for new homeowners

Security is a significant concern for most homebuyers, but it is sometimes overlooked in the hustle and bustle of moving.

Shaun Rademeyer, chief executive of bond originator BetterLife Home Loans, offers some tips for ensuring that you and your newly relocated belongings are safe and secure.

·         Change the locks. You don’t know who the previous owners might have given spare keys to, so it’s best to start afresh. Before moving into your new home, replace all the existing exterior locks and make sure all the keys are in your possession.

·         Ensure that all sliding doors and windows have sturdy burglar bars or security gates and fit correctly in their frames. You may also want to install safety chains and spy holes on solid doors and fit additional anti-lift devices to sliding doors.

·         If there is no alarm system, have one installed before you move. If an alarm system is already installed, get the previous home owner's instruction manual and emergency numbers. Then, change the security codes and passwords. It would be best to regularly have the alarm system checked after you move in and change your passwords from time to time.

·         Ensure the alarm system has an exterior siren to alert neighbours and passers-by if the alarm goes off. Burglars know that the police or security companies can't respond that fast if they trigger the alarm, so they make sure to be in and out quickly. However, they may be deterred by the fear of having other witnesses.

·         If your new home already has CCTV, check that the system is working. In addition, you might consider installing a camera security system linked to your Smartphone before you move in, as these have proved to be strong burglar deterrents.

·         Check to see how vulnerable the property is. Then, stand outside and imagine how you would get in if you were locked out. The first thing you think of is probably how a burglar will get in. It would help if you addressed these safety concerns before moving in - whether it's a branch hanging over the wall or a garage door without a lock.

·         Install lights. Criminals don't want to remain unseen, so make sure the whole property is well-lit at night. You can also set timers to turn interior lights on and off when you are away to create the illusion that someone is home.

·         Don't leave furniture or belongings in the front garden or on the pavement in full view when you move. You don't want burglars to start making their inventory. Rather have everything carried inside the house immediately, even if it takes time to sort out.

·         If possible, hang curtains or blinds before you move in so that the layout of your furniture and the location of your belongings aren’t visible from the outside.

·         Introduce yourself and your family to your new neighbours as soon as possible and join the local neighbourhood watch if there is one. This will assist you in fitting into your new community and making friends that will look out for you and your home as you look out for them.

·         Before moving, check your household insurance policy to see what it covers and what changes you might need to make. It’s also a good idea to mark any valuables by engraving them with your ID number. Make a habit recording of all their serial numbers and take photos of jewellery, watches and other unique items like coins and artwork so that they can be easily identified if thieves are caught with them or try to sell or pawn them.

Remain security conscious even after the move. For example, don't leave any ladders, tools or equipment out in the garden, as these could tempt opportunistic thieves to gain access into your home. Likewise, don't leave a spare key under plant pots, rocks or doormats. Instead, ask trusted neighbours to take care of them if you need to give access to friends or family members while you are not at home.

SOURCE: www.privateproperty.co.za

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Midrand now one of the highest growth areas for young buyers

Midrand is a vast area linking Johannesburg and Pretoria with over R5,6 billion in real estate transactions over the last twelve months to October. It is now one of the fastest growth areas for young buyers with some 47% of sales over the last year to millennial buyers. This is among the highest in the country over the last year according to Charles Vining, managing director of Seeff Sandton and Midrand.

Midrand property offers very accessible prices, although luxury areas and demand for luxury homes are growing. Given that it is built around the N1 and is an excellent base for its accessibility for those who work in the area or around the greater Johannesburg and Pretoria metro areas. The market is dynamic with the area home to a mix of residential along with many commercial, business and retail nodes and agricultural areas.

A new landmark includes the spectacular Mall of Africa, the largest in Africa which adds to attractions such as the Kyalami Grand Prix Circuit, Country Club and equestrian facilities.

Prices are very accessible; hence it attracts a large number of first-time buyers and sellers. There is a broad choice for buyers and investors, ranging from affordable apartments to sectional title complexes, freehold homes and gated communities. Luxury developments include Waterfall Estate.

Aside from own-use, the area is also popular for rental investments given the high demand for rental accommodation, says Vining. Young buyers and sellers make up a sizeable portion of the market along with families given the excellent childcare facilities and schools, but the area is also ideal for older buyers looking for a country setting. Although stock is dominated by freehold properties at 53% compared to 27% sectional title and just under 20% estates, sectional title property is the fastest seller. Lightstone data shows that almost two thirds of all sales over the last year are sectional title.

Of the R5.6bn in transactions recorded for the 12-months to the end of September, 72% fall below R1,5 million, a further 42% between R1,5 million and R3 million and about 8% above R3 million. Aside from sectional title, secure properties and gated communities are in demand. Lightstone shows that estate homes are achieving the highest prices. For example, recorded sales include R10,5 million in Saddlebrook Estate and R34,25m in Kyalami Estate.

Within Midrand, there are different areas and price points and Seeff’s agents recommend that sellers, buyers and investors work with a credible agent for the right guidance, especially if you are buying or selling for the first time. There are many aspects to the buying and selling process including understanding the costs, deposit requirements and the processes involved. Buy-to-let investors are for example not always aware of the additional costs related to rental property such as levies for sectional title complexes which can differ greatly. Lower levies are always more attractive for buyers. Sectional title sellers should be aware that buyers are now well informed and often ask for the financials of the complex as they do not want to buy if there is financial mismanagement or where there is a likelihood of special levies being raised in the near future.

Purchasers in new developments should note that the sectional title register is not always done at the time of purchase and may take up to 16-24 months which will result in a back-dated City of Johannesburg (COJ) bill. They should therefore make provision for the rates in situations such as these. Buyers also look for good infrastructure when it comes to roads in the agricultural areas which, in Midrand, are characterised by homes or cottage homes on large plots of land. Buyers of larger properties and small holdings usually want information regarding town planning and permission details such coverage, dwelling permissions and so on. Buyers looking at apartments or homes in properties adjacent to open tracts of land want to know what the plans are for the land.

Landlords should also note that while Midrand has a buoyant rental market and monthly rentals can range from R25,000 to R40,000 per month, top end tenants tend to shop around for the best value for money. Writer : Writer: Gina Meintjies

SOURCE: www.privateproperty.co.za/advice

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Ensuring your property is an asset & not an expense

Although property is classified as an asset, there is more to this than initially meets the eye. Assets are purchases that grow in value over time. No matter what the home cost initially – whether it was within the affordable price range or within the luxury market – if the home grows in value and is later worth more than it was initially purchased for, then the property can be considered as an asset.

“Purchasing a home is one of the most expensive investments a person can make. It is easy to feel like owning a home is more of an expense than it is an asset. However, homeowners need to take a step back and consider the long-term growth of the property to appreciate that it is, in fact, one of the sturdiest asset classes in which to invest,” Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett.

According to Goslett, the value of the property will appreciate or depreciate depending on several factors, including things such as the overall state of the market, development in the area, and the demand for property in the area. For second homes and investment properties, Goslett explains that not only will buyers need to consider whether the home is growing in value over time, but they should also consider if it is generating, or will one day generate a profit from the income it receives.

“While paying off the bond on an income property, it might not always be possible to generate a profit once one deducts all the relevant expenses, including items such as levies, rates and taxes, and the home loan repayments themselves. But, once the home is fully paid for, the rental income the landlord receives will be pure profit for the landlord to enjoy,” Goslett explains.

To ensure that the property has the potential to be an appreciating asset and not just an expense, buyers will need to do the research and make the right decision upfront. When selecting a property, Goslett encourages buyers to consider the location, which is a key element in the home’s potential for growth in value. Another aspect to pay attention to is the price of other homes in the area and how they have grown over the last few years, as well as any future development plans that may be happening in the area that could have an impact on the property’s value.

“A great way to assess an area’s potential for future appreciation is to look at the history of the area. By looking back, it is possible to some degree to look ahead. Most real estate professionals are able to pull suburb reports and can tell you how much house prices have appreciated in the area. Useless there are big changes happening in the area, it is a fairly safe bet to gauge the future appreciation potential of an area based on its past performance,” Goslett recommends.

Speaking into the changes that could impact future value, Goslett mentions that any upgrades to infrastructure or the development of new amenities will positively impact the appreciation potential of the homes in an area. “While it depends on the facility, the introduction of something like a mall or a popular coffee shop can boost property values as it offers convenience to the residents. Because many potential buyers look for a property with education in mind, new schools will have a greater influence on property values than shopping malls. A good school that offers an exceptional education will increase demand for property surrounding it, which will push property prices up,” says Goslett.

Ultimately, the success of a property investment is linked to the decisions made at the start of the purchasing process and not when the property is sold. “To ensure that you purchase an asset that grows in value over time, you need to do the research and involve an experienced real estate professional whose advise you can trust. As experts in their given markets, their advice can prove invaluable in helping buyers make sound investment decisions,” Goslett concludes.

SOURCE: www.privateproperty.co.za

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The Absa Homeowner Sentiment Index for Q3 2021

Confidence in the South African property market increased by five percentage points at the end of Q3. “This is great news,” says Nombuso Sibeko, Data Science Manager at Absa Home Loans, “Clearly, there is an improvement in optimism. However, we must also take into account the fact that this does come off the back of the July unrest resulting in acts of violence and destruction to property.”

Respondents attribute their elevation in confidence to property value increases, their consideration that property is a secure asset, and property having the potential to generate long-term income, all of which were emerging in Q2. “Measuring sentiment post the outbreak of the pandemic has proven critical to understanding timings around buying, selling and investing in property. For example, it is only now, after almost two years, that selling sentiment is finally recovering to pre-lock-down levels,” says Sibeko.

“But we also await the outcome of municipal elections, and as with all major political, economic and socio-economic challenges and change, sentiment fluctuates depending on such results.”

Sibeko makes a good point given that HSI Q3 reveals that 80% of investor respondents are concerned about political instability, with 100% of them similarly concerned about land expropriation risk.

Good time to buy

For example, 81% of respondents consider it an appropriate time to buy property considering the current market backed by the 54% that are unchanged in their view that property will always be a good investment. In addition, 47% also highlight the low interest rate as a good to reason to consider buying. “There is also a group of respondents that remain under financial strain due to Covid-19 (43% of our respondents), and 42% feel the economy is under-performing,” says Sibeko.

Renovation sentiment

“What we also found is that non- first-time homeowner respondents, regardless of their concerns around job security and unemployment, score the highest in renovation sentiment. This has been an interesting upward trend since the start of lockdown, as typically, the non- first-time homeowners’ segment have tended to score quite low in renovation sentiment. This change in sentiment seems to be driven by the current opportunity to get even higher returns when selling as significant house price appreciation has taken place from the 2020 prices, driven by the strong buying sentiment.”

The sentiment around renovating and making alterations has recovered from the dip in Q2 to match that of Q1. The investor respondent group is the only segment that shows negative sentiment towards this type of activity because they believe materials are currently expensive and the potential exists to over-capitalise.

Affordability – time to sell

The 44% of respondents who can no longer afford their property believe it is better to sell currently. The same percentage believes that properties can still realise a reasonable selling price. Investors are keen to pick those up, given their belief that there will be a high demand for rentals due to the pandemic. “This sentiment is reflective of the increase in selling sentiment in Q3 that is partly driven by the aforementioned belief: that if you can no longer afford a property, then it should be sold,” says Sibeko.

·         55% of respondents still feel it is better to own rather than to rent. But being unable to afford to purchase property combined with the current sentiment around job security and risk of unemployment makes the buying decision difficult,” says Sibeko.

Provincial sentiment

The Absa HSI also measures sentiment at the provincial level. In Q3, 80% of respondents from the three provinces with the highest response rates, namely Gauteng 47%, Western Cape 19%, and KwaZulu Natal 14%, provided the following overall sentiment measures: Gauteng is up four percentage points from 79% in Q2; Western Cape is up seven percentage points, and KwaZulu up by six percentage points.

Conclusion

“Looking at the overall positivity update, we conclude that this is potentially a good time for the market because there is more willingness to put more stock into the sales arena, the lack of which was a serious concern when the market swung from demand growth being higher than supply, as was indicated by previous HSI results,” says Sibeko. “This swing of addressing stock shortages will simultaneously increase selling prices.”

A further consideration that will affect sentiment in Q4, as it has done throughout the year, is the interest rate. Absa is confident that the interest rate will remain where it is currently for the balance of the year. “We do, however, expect interest rate hikes in 2022, and this will likely create a slowdown in positive sentiment, the effect of which will only be evident sometime after the rates increase.

“And of course, we will continue to feel the effects of Covid-19, which we’ve seen as a recurring driver of negative sentiment across all the sub-indices we measure, barring the buying vs renting sentiment. Moreover, with analysts predicting up to four years of pandemic fall-out, we can expect some uncertainty in the market to prevail for some time,” concludes Sibeko.

SOURCE: www.privateproperty.co.za