Millennials Buying Property
Category News Letter
Millennials, take your first step onto the property ladder now
It is not easy for young adults to take the plunge and venture out on their own. One would have to factor in student debt, entry-level salaries, the rising cost of living, the lending criteria of banks and perhaps the fear of such a tremendous financial commitment.
With the banks now proving to be more accommodating, you will most probably have little difficulty in getting a home loan. The banks seem to be keen to lend to first-time homeowners and rather than paying rent, invest in a home of your own.
Studies have shown that purchasers usually come into the market at age 25-35 when they have had a few years to settle into their environment, after studying and saving up for a deposit. Purchasers aged 25 usually buy small apartments or townhouses (sectional title units) to start with. The average national price for an entry-level home (75-140 square meters) is around R850 000, with an average medium size house currently costing around R1 350 000.
The current market is perfect for new young purchasers. With low-interest rates and banks being more relaxed with their lending criteria, young purchasers can easily enter the market now and should invest in property as soon as possible.
In Gauteng, sectional title sales as a percentage of total sales have risen by 6.8% from an average of 27.4% during 2010 to 34.2% during 2018. As recently pointed out by a senior research analyst, that although house price inflation for sectional title properties is not outperforming freehold properties overall, smaller sectional title properties such as two bedroom units are marginally outperforming large, three bedroom freehold properties.
Now that you have decided to buy your first home, let's have a look at important considerations and where to start?
1. Know what you can afford. Purchasing a property is not just about qualifying for the bond, but also ensuring you can actually afford everything else. Aside from your bond, there are monthly taxes, rates, levies and of course the upkeep. If you are planning to have tenants, making use of a reliable real estate agent ensures that your property is well looked after whilst you continue your studies, travel the world or climb the corporate ladder.
2. Think beyond price. Decide where you would like to live. If you aren't sure about your specific location, spend some time in the areas you are interested in at different times of the day to get a feel for the area. Consider what you would prefer: an older, more established area, or a newer one? Would you like to live in a gated community, or are you prepared to trade some security for your independence? To some extent, the answers to these questions will help you decide where you should start looking, but you also need to consider whether these neighborhoods are within easy reach of work, public transport, medical services, shopping, and entertainment facilities.
3. Research comparable homes. A level-headed understanding of the property market will give you an advantage. Once you have chosen your suburbs to purchase in, take your time to learn more about that area. What are the prices of homes there? Does this fall within your range? Is there potential for solid capital growth? Browse the online listings in and around your budget and depending on what's important to you, get to know the neighborhoods, find out about safety and security.
4. Legal costs. It's important to understand the full cost implications of purchasing a piece of real estate. The costs of purchasing a home include a number of once-off fees, many of which are legal and administrative costs, for which you need to be financially prepared. You will have to save up for conveyancing fees (referred to as transfer costs) calculated on the purchase price of the property as well as bond registration fees (referred to as bond costs) calculated on the loan/bond amount. The seller will generally appoint the conveyancer to transfer ownership of the property and your bank will appoint a bond registration attorney to simultaneously register the bond with the transfer of the property. The purchaser is liable to pay both the transfer- and bond costs.
Yes, there are several other key factors to consider. But for now, the good news is that home loan approvals are up and interest rates remain historically low. The recent recession has not been good news for sellers as economic downturns or tough periods tend to favor purchasers. The best time to purchase a house is during a purchasers' market.
You might face a few obstacles along the way, but it is definitely possible with the right assistance. At least you don't have to face all of this on your own - approach an estate agent, bond originator and conveyancer to assist you in successfully purchasing and becoming a first-time homeowner.
Author: Reinier Joubert RFJ Inc. Attorneys
