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I IIssue: April 2007
I Editor: Berry Everitt I |
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Your Area Specialist:
Chas Everitt International sales
agents have all the latest market information regarding
local property values at their fingertips – and
are committed to the highest standards of personal service
when it comes to selling your home. In addition, the
Chas Everitt International property group offers you,
the homeowner, the best possible exposure for your property
in both national and international markets. So if you
are thinking of selling your home, call your nearest
Chas Everitt International office today for the name
of your local area specialist - or visit www.chaseveritt.com
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Every month the Property
Signpost Newsletter will be issued to all our
subscribers, filled with real estate information to
help you make an informed decision, whether you are
buying or selling a property.
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Contents
1. Welcome
by publisher
2. Choosing
the right home site
3. Investment
‘rules’ still in play
4. The trouble
with cash…
5. Don’t
switch in haste
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1.
Welcome by publisher
Three cheers for Reserve Bank governor
Tito Mboweni. The decision he took this month to leave
interest rates where they are (repo rate at 9 percent)
was a really brave one, in the light of still-rising
inflation and the fact that credit growth is at near-record
levels. We also believe it was the right one, because
the effects of last year’s rate increases are
really starting to pinch now and another hike would
have dented consumer confidence by compounding the
strain caused by higher fuel and food prices.
As it is, Mr Mboweni’s decision sends a message
to the market that economic growth and job creation
is still paramount in government thinking, and that
can only be good for the property market.
Meanwhile, accolades should also go to the architects
of the new Integrated Coastal Management legislation.
Much has been said about the fact that it restores
the right of public access to the coast, which has
been increasingly cut off by luxury housing and golf
course developments.
However, equally important is that it contains nationally
applicable measures to protect our beautiful –
and limited - coastal resources from being degraded
by inappropriate developments and pollution, and especially
to protect estuaries, which are the “nurseries”
for most of our commercial fishing stocks.
Indeed, while it may not be everything that the environmentalists
wanted, it is to be applauded as a far-sighted and
far-reaching policy and another reason to be proud
of SA
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2.
Choosing
the right home site
The growing number of new entrants to the property
market is putting the existing housing stock under
strain – and prompting more people to consider
building a new home instead of buying a pre-owned
one.
This of course entails finding the right stand and,
as in every property purchase, position is critical.
Then once the area or particular estate has been selected,
buyers should also consider the following before buying:
- Avoid low-lying land where water will gather.
Although there are construction techniques available
to combat the risk of damp, the need for special
materials will undoubtedly add to the cost of building
in such areas.
- Avoid very steep slopes. The dream views they
may provide seldom justify the additional excavation,
piling and retention costs involved in building
on such stands. Besides, an extensive outlook could
quite possibly change in a few years’ time
when homes have been built and trees have grown
on neighbouring properties.
- Consider the possible effects of future development
in the surrounding area, and what neighbours will
be allowed to build. A multi-storey apartment block
next door, for example, might block a view, cut
out the sun for much of the day, or remove much
sought after privacy – all factors that would
reduce the value of your home.
- Check the local building regulations and home
owners’ association building guidelines to
establish whether you will be allowed to build the
size and type of home you want. Many estates these
days have strict architectural constraints.
- Check the availability of water, sanitation and
electricity for new homes and developments in the
area with the local authority.
- Ask an architect, development consultant or knowledgeable
and reputable builder to look at the stand you like
and advise whether the home you want can be built
there. There is no substitute for experienced help,
particularly for a first-time owner-builder.
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3.
Investment
‘rules’ still in play
Although the property market is currently
on a plateau, many investors believe there will be another
market surge starting in 2008 and are consequently hunting
for good investments now that will put them ahead of
the wave.
However, there are certain factors that they need to
take into account, not the least of which is a clear
understanding of the tax implications of the purchase
of an investment property - for their current earnings
as well as from a capital gains point of view.
Much will depend on whether it will be a cash purchase
or whether a new mortgage will have to be covered. And
the investor should know what he or she plans to do
with any proceeds of the investment.
Before buying, the investor needs to also consider the
overall prospects for the national economy and, equally
important, the economy in the area in which the property
is situated. Even when the country is in a recession,
certain areas will boom because, for example, a new
industry has moved in, or foreign tourists have discovered
its attractions. Conversely, some areas will not do
as well as others even when the national economy is
growing strongly, as is currently the case.
Beginners should start small, buy with a sizeable deposit
and ensure that sound tenants will continue to pay off
the mortgage. Property investment can hardly fail if
the investor is satisfied with the rental return. Then,
if higher interest rates or unexpected personal circumstances
force a quick sale, the selling price will not
be a critical issue. And if there is a big capital gain,
that's the entrepreneur's reward.
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4.
The trouble
with cash…
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The new National Credit Act which
comes into force later this year will impose stricter
criteria on lending and will ultimately make credit
harder to get – which will no doubt push more
homebuyers into paying cash instead of applying for
a home loan.
And those who can afford to do so – or at least
put down a substantial cash deposit - are likely to
have serious clout when it comes to negotiating price.
After all, a cash offer is every property seller's
dream.
What is more, investors buying a property to let with
cash in hand won’t have to worry whether the
rent coming in will cover the bond repayment every
month.
However, there are some potential pitfalls, the most
important being the fact that no home loan means no
bank valuator – and no confirmation that the
property is worth what you’re paying for it.
So before you hand over a large cash sum, you should
seriously consider getting your own valuation done
by a qualified professional.
Secondly, you need to be pretty sure that the property
will appreciate much more than your cash would grow
if saved or invested elsewhere – and that you
are going to realise this “profit” within
a relatively short time.
And thirdly, cash buyers need to be prepared for possible
delays in the transaction due to the requirements
of the Financial Intelligence Centre Act (FICA). This
legislation, intended to keep SA free of money laundering
and other dubious financial transactions, provides
for estate agents to report to the state Financial
Intelligence Centre the receipt of any cash amount
of more than R50 000 in any property transaction.
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| 5.
Don’t switch
in haste |
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Higher interest rates have prompted many homeowners
to think about switching their home loan to a different
bank where they can perhaps get a better rate, but before
you go this route you need to know exactly where you
stand with your current lender.
It may be a better option to see if you can’t
negotiate a better rate without moving your loan –
a possibility if the value of your home has increased
or your credit rating has improved since you first obtained
the loan.
On the other hand, if you have not had your current
loan long, you should check to see if there would be
any penalty for early repayment when moving to another
bank.
If you do decide to switch, or refinance your home,
the steep increase in most property values in recent
years should mean that you can release additional capital
to extend or modernise your home and further improve
its resale value.
But you also need to be aware that a new mortgage may
lock you into another 20-year loan. This may not be
a good move if you are only a few years away from paying
off your original loan.
It is also important to bear in mind that the cost of
registering a new bond with a new lender may absorb
the savings of a lower interest rate for several years,
and crucial to determine whether you would still benefit
from any future interest rate cuts with the new lender.
In short you need to be fully aware of all the potential
problems as well as the benefits before making a switch.
And the best way to obtain the information you need
is to consult a knowledgeable loan consultant from a
reputable mortgage originator.
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