New deposit guarantee scheme will facilitate home buying for those without quick access to capital

Anne Porter Knight Frank have become one of the first real estate agencies in Cape Town to offer their clients the ability to pay the initial deposits on a property without having to draw on their capital until the transfer comes about.

APKF have formed an association with Antony Solomon, an Australian attorney who married a South African girl and moved to Cape Town. Solomon has introduced a deposit guarantee scheme for property buyers which makes it far easier, cheaper and quicker for those wanting to buy any sort of property or land to find the required cash when the funds they intend to use are temporarily tied up in a house sale, shares, fixed deposits, trusts or with a third-party lender such as a relative.

Deposit Advantage, as the organisation is known, will guarantee that a deposit is paid on the due date. It does away with the necessity of finding the deposit upfront, as is usually required.

The scheme, which originated in Australia in 1989, is now operative in that country, New Zealand, the UK and the USA. In New South Wales, Australia, some 25% of buyers use the facility.

The backers are the international insurance group, Lombard Insurance Group, a subsidiary of Hollard Insurance, one of the major groups of this kind to come through the global crisis intact.

Since setting up in SA, Solomon has signed intermediary agreements with such high profile bond originators as ooba, Betterbond and Bond Choice. The product has been well received in the market, particularly by developers, including the Rabie Property Group.

According to Solomon, the deposit guarantee scheme catches on quickly wherever it is introduced because it genuinely offers the property buyer significant savings, especially in relation to bridging or bond finance.

"It has the big advantage of being almost always far more readily available than traditional short term finance,” he said. “On receipt of an application and supporting documents a guarantee is usually issued within 24 hours. Deposit Advantage rates are incredibly competitive. We charge a once off fee of 2,3% on the deposit value for a three month guarantee, 3% on six months, 5% for 12 months and 5,72% for a 24 month guarantee (excluding VAT)."

These rates, he said, will drop if SA’s interest rates come down but, at the current levels, they are significantly cheaper than that the 43% plus annualised rates currently charged by bridging finance groups.

Solomon says that to qualify for acceptance, the borrower has only to prove that he has the funds needed and that these funds can be accessed by the transfer date.

Bond finance, and especially bridging finance, being comparably so expensive he adds, "this is the logical way to go - but it is also logical if it avoids having to sell shares at depressed levels, withdrawing fixed deposits ahead of their full maturation or using money earning a good return elsewhere".

Lanice Steward. MD of Anne Porter Knight Frank, commented that Deposit Advantage puts SA – and Cape Town in particular – on the same footing in the property world as the “really smart operators” and, she said, it will be a big help to many people who otherwise might actually not be able to get the particular home they like.

“The only danger,” she said, “is that some buyers might think that the guarantee is totally comprehensive. We have to keep warning them that it covers only the deposit.

“Deposit Advantage can make a sale smoother and easier. It will also reassure the many sellers who dislike waiting to secure a deposit. It is, therefore, a big step forward in residential marketing,” she said.

Applications to Deposit Advantage can be made online via or via the Deposit Advantage call centre on 0860 110 313.

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