Advice to first time homebuyers
Interest rates may be at historic lows - but first-time buyers find it increasingly difficult to enter the market.
Recent Absa statistics show that house prices are now about 15% higher than a year ago, with the average house price now R1m.
That places the average' house out of reach of many, if not most, first-time home buyers, says. At current rates, home owners will have to pay about R9 500 a month to service the bond on a property of R1m over 20 years - and that's on top of their other monthly expenses that are taken into account in terms of the National Credit Act before a bank will grant a bond.
However, all is not lost for young buyers who wish to own their own homes. Smaller properties, such as apartments or townhouses, offer a first foothold in the market and allow young buyers to start building equity.
There are additional factors to consider before buying into group housing schemes. The first is that although buyers will own their homes, they will share ownership of common areas and will be jointly responsible for the upkeep and maintenance of these areas, which are funded by monthly levies.
Ownership in schemes is arguably also slightly more complicated than owning free-hold property where owners have sole discretion in matters such as renovations, additions and even whether or not to keep pets. Such matters in a shared scheme are regulated by rules that have to be adhered to by owners.
Prospective buyers must familiarise themselves with the applicable management rules before committing themselves and to establish how much monthly levies are and what they cover.
Buyers are also advised to carefully assess the ratio of owners to tenants living in a particular scheme. Owners who occupy their own units tend to insist on high maintenance standards and are more likely to regularly pay their levies. This makes for better financial planning and limits the chances of unforeseen expenses and the necessity of additional once-off levies.
Lastly, buyers should remember that size does count. A small studio may be cheaper and thus more affordable, but a two-bedroom unit may prove easier to sell once the owner himself is ready and financially able to upgrade to a bigger property.
Article by: Martin Schultheiss - www.harcourts.co.za