Cape Town - Property transfer duty is a government tax levied to transfer the property from the seller’s name into the buyer’s name, and it generally constitutes the major portion of the costs involved.
It is prudent to make provision for some increase.
John Loos, property economist at First National bank gives us 10 property- related tips to consider.
Be prepared for interest rate hikes
More directly related to housing, we believe that the Reserve Bank will continue to gradually raise interest rates. It is wise, when deciding to buy a home, to take this risk into account when deciding on how much to spend and borrow.
Make provision for increased municipal rates and utilities tariffs
Municipal rates and utilities tariffs are all rising at a pace faster than overall consumer price inflation. Make provision for this.
Buying a home? Go for lower value homes with no frills
Swimming pools and Jacuzzis will increase your operating-related costs. No-frill homes will greatly reduce maintenance, insurance and a myriad of other related services costs.
Buy well within your means
For most people the home is arguably the single most important driver of their living expenses. It is important that aspirant buyers buy well within their means.
Paying extra into your home loan account can be a good idea
If you pay into your bond account ahead of schedule, you build up an amount that can be accessed in a time of emergency or for major once-off expenditure items.
Fixing interest rates is an option for greater cash flow certainty
While fixed interest rates can often seem unattractive relative to the prevailing interest rate at the time, the fact is that they can be a great tool for providing certainty over the bond instalment part of one’s cash flow. There is no right or wrong decision, but fixing interest rates can be useful should you be close to the edge in terms of finances.
Cut back on unnecessary spending
While expenditure cutbacks in tougher financial times are very difficult for the poor, there are more opportunities for many middle and upper income households to save money. Cutting the DSTV, holidays and outings can all add up and help a lot in enabling you to meet your home loan and other requirements.
Do not get too attached
For those who already own a home, it is crucial not to become sentimentally attached to it to the extent that it financially weakens you and you will not consider moving.
Do not be too afraid to downscale
When far bigger expenditure cuts are required, a portion of households will pro-actively sell their property in order to downscale due to financial pressure. This can be a very effective measure: it will not only reduce a bond repayment but also lower the myriad of costs mentioned above.
Loos emphasises that these points are merely helpful tips to consider, and suggests people consult their financial planners for advice.
* John Loos acquired a master’s degree in economics at the University of Stellenbosch before starting his career as an economist in the national Treasury.