Thinking of buying your first home?
JOHANNESBURG – For the average South African trying to eke out a living, buying your first home is probably going to be one of the biggest financial commitments you make. First time buyers need to take several matters into account before signing on the dotted line.
John Loos of FNB Home Loans, says buy within your means, to allow for the possibility of interest rate hikes in the coming months and years. Loos says with interest rates currently at “multi-decade lows” rate hikes are likely and need to be factored in.
Loos says it is important to take into account significant electricity hikes that are on the cards and municipal rates and tariff increases over the next few years. What also needs to be remembered is likely increases for services like water and sewage and towards the maintenance of infrastructure.
He says never before in the property sector has location been so vital with looming petrol price hikes and the introduction of toll fees in parts of Gauteng which are likely to impact heavily on the wallets of those who travel extensively. He says in this day and age it is wise to consider proximity to your place of employment – not only to save on petrol, but also to avoid spending hours on the road to and from work.
For young couples planning on having a family, there are even more issues to take into consideration when buying a home. Proximity to a suitable school and other amenities is crucial. If you are not planning on sending your children to private schools, you have to investigate government schools in the suburb you are considering buying in. Should a government school be in the vicinity, you need to determine whether or not your home is zoned within the area serviced by that particular school.
Loos points out that smaller homes are cheaper to maintain and will also cost you less in terms of electricity, water, etc.
Chief executive of Absa Retail Bank, Gavin Opperman, advises that once you have selected your ideal starter home, your next step should be to visit your banker to arrange for finance. Opperman also stresses the importance of buying within your means. “That implies that first-time buyers may have to purchase in a different area or different type of housing they initially had in mind, but as their financial position improves over time, they may be able to sell and upgrade in terms of the property and the area,” Opperman said.
Meanwhile, Warren Ingram, a director of Galileo Capital and financial adviser, advises not to buy if you don’t intend staying in your residential property for eight years or longer. If say, you sell after around five years, the levies you will have paid and the financial costs incurred will not be worth your while. Rather rent until you have accrued a sizeable deposit to put down.
Ingram says when making your calculations, it is a good idea to take the various banks’ affordability test which recommends that you do not spend more than 30% of your income annually in servicing your bond. He does not recommend buying property off plan, saying the quality of these mushrooming complexes is questionable and they are sizeably smaller than more established complexes and residential units.
As for going the auction route, Ingram says the process is slightly more transparent than working through an estate agent. The danger here is getting carried away during the public sale and over-bidding. Just remember to put aside 10% of the selling price for the auctioneer’s fee.