*This article first appeared in our Property360 digital magazine
Economic conditions might be tough, but the property market is still active, thanks to low-interest rates.
With lower property prices and interest rates, prospective homeowners could pay off their bond over 20 years and save money on interest, says Sbusiso Kumalo, chief marketing officer for African Bank.
When buyers apply for a bond, they will discover all banks will review their credit score and this is where a good score is either going to come back and delight them – or haunt them. So, if you’re planning to buy a property, knowing your credit score is the place to start.
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Understanding and improving your credit score
Kumalo says he cannot stress enough the importance of a good credit score. “If you have a low credit score, you are likely to struggle to get a loan from any store or bank, whereas a higher credit score increases your ability to access credit, like a favourable bond or loan.
“Understanding how your credit score is calculated will give you insight into how companies view you according to your credit history and how you manage your money.
“It also allows you to confirm that all debts against your name are correct,” he says.
You can improve your credit score by following these steps:
• Access a credit report – you can do this free once a year – and make sure the information is correct.
• Pay your accounts on time. The easiest way is to set up automated bank payments.
• Track your monthly expenses with a budget and save for emergencies instead of having to take out a loan to deal with unexpected expenses.
“By improving your credit score you improve your overall finances, which is a positive when it comes to applying for a loan and having peace of mind that you are ready for this financial commitment.
“If you secure a home loan, keep your credit record clean so that you are able to apply for credit to make improvements to your home to up its value.”
Choose a home with potential
Adrian Goslett, regional director and chief executive of Re/Max of Southern Africa, says when buying a home you must ensure the property has the potential to grow in value over time.
To do this, you should consider the location, which is a key element in the home’s potential for growth in value, and pay attention to the price of other homes in the area, as well as future development plans in the area.
He adds: “Property is one of the most expensive purchases you can make. To ensure that these purchases work for you instead of against you, you need to view this decision as a medium to long-term investment.
“For the best chance of securing a good profit on selling, homeowners should hold on to a property for roughly five to 10 years. This means they need to be sure, before going ahead with the purchase, that they can live in the home for a number of years.”
For many buyers, particularly first-timers, buying property off-plan is an attractive option, says Bruce Swain, chief executive of Leapfrog Property Group.
As with any investment, there is an element of risk in buying off-plan.
However, there are a number of ways in which this can be managed and mitigated. “Naturally, some buyers are concerned about paying for something that they can’t yet see and that the final product won’t be what they were sold in the development phase. These are legitimate concerns, which is why it is important to approach this kind of investment with an open mind and armed with the right information.”
He says off-plan buyers should:
Check the credentials of the developer: Start by verifying the legitimacy of the developer by checking whether they are registered with industry bodies such as the Master Builders Association or the National Home Builders Registration Council. Look at other work the developer has done and enquire whether the project was completed on time and within the budget.
Stay close to the project: Rather than purchase the property and forget about it until it’s ready for you to move in, you should take an active interest in the development by visiting the site regularly, engaging the developer about progress and generally staying on top of where things are at.
Understand the fine print: It’s always a good idea to familiarise yourself with the contents of a contract or agreement that pertains to the purchase of a property. In the case of off-plan property, pay special attention to things like choice of materials, date of occupation and the buyer’s right to cancel the contract if the developer does not fulfil their mandate in time.
Buying an older home
Claude McKirby, co-principal for Lew Geffen Sotheby’s International Realty in Cape Town’s Southern Suburbs and False Bay, says buying an older home could give you entry into a stronger market and a better neighbourhood than you might otherwise be able to afford.
Older properties often have great character features, are larger, and are usually built more solidly than newer houses. However, they can also be the stuff of nightmares if buyers aren’t careful.
Cobus Odendaal, chief executive of Lew Geffen Sotheby’s International Realty in Johannesburg and Randburg, suggests you make a list of factors to check and questions to ask before you view property so that you can make an informed decision based on facts rather than emotion.
Factors that should be checked include
Foundation/structural faults: Although minor cracking may only be a sign of settling in the home, large cracks can be an indication of serious structural problems. Another sign that a home is possibly experiencing structural problems is when multiple door frames don’t appear to be square, or it’s difficult to close some doors.
Poor drainage/grading: The most obvious sign of poor drainage is pooling water but another is a bouncy bathroom floor which can be evidence of hidden damage such as a leaking shower drain. If the garden has mini lakes or continually muddy patches the property might have poor drainage.
Rising damp: Look for bubbles on outside walls as this could indicate that the damp course was not put in at the building stage.
Electrical wiring: It’s typical to see extension cords running from room to room in older homes, placing a burden on the electrical system. Another common problem is exposed wires, often the result of DIY repairs.
Roof: Ask about the age of the roof as most have a lifespan of around 20 years. Slate tiles that are out of alignment and cracked tiles are tell-tale signs of potential leaks.