Rates will affect home choices

Municipal rates are set to become a much bigger factor in home affordability calculations – and in the buyer’s choice of suburb.

So says Johalna Minnaar, Gauteng North regional manager for the RealNet property group, who notes that the imminent rates increases may well affect homebuyers’ ability to qualify for loans under the provisions of the National Credit Act.

The Act requires that not only all credit commitments but also all regular and projected household expenditure be taken into account when a potential buyer applies for a homeloan, so that he or she will not become over-committed financially.

“The municipal rates payable on a new property are included in this calculation and if they would put the buyer beyond his affordability limit, he would probably not be granted the loan. And this may well be the case more often once rates are raised,” Minnaar says.

Rates are generally raised in June or July, and this year are expected to jump substantially in many areas following the revaluation of properties to comply with the new Municipal Rates Act.

“Indeed, rates will soon account for an even bigger chunk of homeowners’ monthly expenditure and so could end up being quite an impediment to homeownership,” says Minnaar.

“However, there is another, positive side to this, because the rate increases are expected to be smaller in some areas while in others rates could actually decrease once the new system is applied, and the desirability of areas with lower rates is likely to be much enhanced.”

Potential buyers who are currently househunting in upmarket areas, for instance, may well turn their attention to more downmarket areas if it means they can qualify for a loan – and then give these areas a new lease of life with a spate of additions and alterations to make their new homes meet their original specifications, she says.

“Areas with lower rates are also likely to be singled out by young, first-time buyers as well as the elderly on fixed incomes, and it is clear that rates are shortly going to play a much larger role in all homebuyers’ choice of location.”

Aticle by: www.realnet.co.za