How much home can you get for your money
Analysing the affordability of SA’s residential property market. South Africans continue to tighten their belts as the pressure of rising interest rates, inflation, and other varying economic factors put household income under strain. This puts the affordability of national residential property under the spotlight. However, while (in nominal terms) national house price inflation remains positive (+1.9% in September 2022), the national average purchase price is down among first-time homebuyers. The price of properties purchased by this demographic registered a third consecutive decline in September 2022 (down 3.5%), reflecting first-time homebuyers’ sensitivity to interest rate increases. Breakdown of the most and least affordable regions in SA Regional house price inflation for the year to 30 September 2022 is broken down as follows: Gauteng South and East: +7.3% Eastern Cape: +5.7% Gauteng North and West: +1.8% KwaZulu Natal: +1.4% Western Cape: -2.1% Interestingly, properties in Gauteng’s South and East Rand continue to register robust growth in prices, despite this region’s average house purchase price being the lowest at R1 183 032. The Western Cape, on the other hand, has the highest average purchase price in the country, but it is the only major region to report house price deflation. After peaking in March 2022 at R2.05 million, the average purchase price of properties purchased in the Western Cape eased to R1.66 million in September with purchase prices over the year to 30 September 2022 registering a decline of 2.1% compared to the same period last year. In Gauteng North and West, the average purchase price of properties purchased this year (to 30 September 2022) is pinned at R1 551 273, while in the Eastern Cape and KwaZulu Natal it sits at R1 490 898 and R1 337 229 respectively. Analysing the price-to-income ratio in SA Examining property prices in isolation reveals only one side of the story, because the price of a home is not the same as the relative affordability of a home. One way to measure the affordability of homes is to look at the price-to-income ratio. Here, the nominal house price is divided by the nominal disposable income per head. This means that in a particular region, homes may be more expensive, but incomes may also be higher thus making the homes there more affordable. In the Western Cape, for instance, the average purchase price of properties purchased from January to September 2022, compared to the same period in 2019, shows an increase of 6.1%. The average gross income of applicants has, however, increased by 17.5% over the same time period suggesting that on average, the homes purchased this year are almost 10% more affordable than those purchased during the same period in 2019. Affordability has also improved marginally in the Gauteng North and West region, as the average income of home loan applicants increases at a slightly faster pace than that of the average purchase price. However, the same cannot be said for homes in the Eastern Cape (where house prices of homes purchased increased by 18.5% during the year to 30 September 2022, compared to the same period in 2019) and, particularly, in Gauteng South and East Rand (tracking a house price increase of 21.7%). In both these regions, this rise in house prices purchased has outpaced growth in average gross incomes, resulting in a relative deterioration in affordability in these housing markets. Affordability amongst first-time homebuyers per region Gauteng is home to the largest percentage (20.3%) of potential first-time homebuyers (mostly young adults aged between 30 and 39 years), while the Eastern Cape has the lowest. Across the regions, but most notably in the coastal provinces, the average first-time homebuyer’s purchase price has decreased. Interestingly, Gauteng South and East where first-time buyers make up more than half of applications received registered the lowest average purchase price year to date. This makes it the second most affordable region for homebuyers, despite a slight deterioration in affordability. Conclusion and outlook Overall, despite varying levels of affordability across the country, the market remains stable and there are still deals to be had for those who want to capitalise on a generous lending environment and shop around using a home loan comparison service. As interest rates begin to stabilise in 2023, we expect to see activity in the market improve, especially among first-time homebuyers. WRITTEN BY RHYS DYER Rhys Dyer is the chief executive officer of ooba Group. This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)
Buying or selling a home? Know the process
The transfer process is synonymous with building a house. The foundation must be laid and certain parts are built simultaneously in order for the process to be completed as one cannot be done without the other. There are many parties involved in a transfer process and each one has an important role to play. The following are the steps involved in the transfer of property: CONTRACT OF SALE The nominated transferring attorney, usually appointed by the Seller, acknowledges receipt of the instruction to all parties involved, being the Seller, Purchaser, and Estate Agent, if one was used. The transferring attorney peruses the agreement to familiarise themselves with the terms and conditions. The attorney makes a point of mentioning any suspensive conditions that may be listed in the contract sale, for example, the date of when the Purchaser shall confirm whether he/she has obtained a bond, should the sale be subject to the Purchaser obtaining a bond. ATTORNEY Once the Purchaser’s bond has been approved by the financial institution and the attorney is informed of this, the attorney shall request all supporting documents from the Seller and the Purchaser, such as FICA documents and any other necessary documents to proceed with the transaction. Furthermore, the attorney conducts a deeds office search to verify the property details that is being sold/purchased. The attorney shall, as soon as possible, contact the Seller’s financial institution, who has an existing mortgage bond over the property, to advise that the property is being sold. COLLECTION OF DOCUMENTS AND FIGURES This step follows from the above-mentioned, whereby the transferring attorney continues to gather all required figures, such as rates clearance figures and certificates issued by a municipality, and clearance figures from the Body Corporate or Homeowners’ Association, should the property be a sectional title or in an estate. Bond cancellation figures are requested from the bond holder, being the existing financial institution. The title deed is requested from the bond holder. The Seller must be informed to start obtaining the electrical compliance certificate, beetle certificate, and plumbing certificate, which are all required to transfer the property. COLLECTION OF PURCHASE PRICE AND COSTS The attorney must ensure the collection of the deposit, transfer duty, and conveyancer’s costs from the Purchaser and clearance costs from the Seller. The collection of documents and figures as well as the collection of costs run concurrently. DRAWING AND SIGNING OF TRANSFER DOCUMENTS The attorney commences drafting the transfer documents, which is the new deed of transfer, power of attorney, and any other supporting documents that may be required to be lodged to pass transfer. The draft transfer documents are forwarded to the attorney that is registering the new bond. The Seller and Purchaser will sign the transfer documents at the attorney’s office. PAYMENTS Upon receipt of the monies from the Purchaser as stated above, the attorney will pay the transfer duty to SARS in order to obtain a transfer duty receipt. The attorney shall pay the municipality and/or the Body Corporate or the Homeowners’ Association in order to obtain the clearance certificates. It is important to note that transfer will take place should these clearance certificates not be obtained from the appropriate body. PREPARING FOR LODGEMENT The conveyancer shall ensure that he/she signs the documents at the top right hand side of the first page of the deed of transfer, confirming that the conveyancer accepts responsibility for the correctness of the facts set out therein. A final check of all information required, all costs collected, and purchase price is secured and all transfer documents are prepared and correct. If another transaction is involved, such as the new bond, the attorney is informed that you are ready to lodge at the Deeds Office in order for both transactions to be registered simultaneously. LODGEMENT AND REGISTRATION If all requirements are met, the necessary transfer documents are lodged in the Deeds Office for the examiners to review the documents to ensure all legal requirements have been met to transfer the property. If the examiners are satisfied and the conveyancer is certain that transfer is ready to take place, he/she may register the transfer, meaning the conveyancer will sign the deed of transfer in the presence of the Registrar of Deeds and the Registrar will also sign the deed. This process from lodgement to registration takes seven to fourteen days. WINDING UP Once the transfer is registered, the conveyancer will notify the Seller, the Purchaser, the Agent, and any other relevant parties in writing that the transfer has taken place. The transferring attorney must now call up guarantees from the financial institutions or from the bond attorney to have the balance of the purchase price paid into the trust account, so that the attorney may proceed to effect payment to the relevant parties, such as the Seller and the Agent. Reference List: THE ABC OF CONVEYANCING by LIZELLE KILBOURN This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)