While many first-time buyers could obtain 100% home loans, Seeff said some higher-value purchases might still require a deposit.
Image: Magnific
Sectional title properties are losing ground to freehold homes as South Africa’s residential property market continues to strengthen.
This comes as annual price growth for apartments and townhouses reached 6.2% in February compared with 9.7% for freehold properties, according to Statistics South Africa’s latest Residential Property Price Index.
Statistics South Africa said annual national residential property price inflation accelerated by 0.9 percentage points to 7.7% in February. The Western Cape continued to dominate the market, with annual price growth of 11.3% - 6.8 percentage points faster than Gauteng’s 4.5%, the country’s second-largest contributor to house price inflation.
Samuel Seeff, chairman of the Seeff Property Group, said buyers who were financially ready should avoid delaying a home purchase because property prices generally increased over time. “Buying your own house is the best decision you can make, and the sooner, the better,” he said.
Seeff added that “property prices tend to rise annually, meaning the longer you wait, the more you will likely need to pay.”
Owning a home allowed buyers to build wealth because each monthly bond repayment increased their stake in the property, rather than paying off a landlord’s bond, said Seeff. He added that equity could later be used to reduce the mortgage on a larger home or, if necessary, be accessed during a financial emergency, although he cautioned against using it to fund lifestyle expenses.
However, Seeff said prospective buyers should not purchase a property before they were financially secure. “A house is a long-term investment, and selling a property takes time if you find yourself in financial difficulty.”
Seeff added that first-time buyers should plan their finances carefully and maintain a healthy credit record, ideally with a credit score of 650 or higher. According to Seeff, buyers looking to purchase an R800,000 property generally require a gross monthly income of about R27,000, while a R1.2 million home would require an income of around R40,000 a month.
Samuel Seeff, chairman of the Seeff Property Group
Image: Supplied.
Banks also assessed income stability, existing debt obligations and monthly living expenses when considering home loan applications, said Seeff. He said permanent employment with at least a three-month track record was typically the minimum requirement, while self-employed applicants generally faced stricter lending criteria.
Yet, Seeff noted that buyers could improve affordability by purchasing jointly with a partner.
Beyond the purchase price, Seeff said buyers should budget for bond registration and transfer costs, including transfer duty on the portion of the purchase price above the current exemption threshold of R1.21 million.
Ongoing costs such as municipal rates and taxes, sectional title levies, insurance and maintenance should also form part of a homeowner’s budget, he said.
While many first-time buyers could obtain 100% home loans, Seeff said some higher-value purchases might still require a deposit.
During the actual sale period, from acceptance to transfer over about a three-month period, buyers should avoid taking on new debt or opening retail accounts, said Seeff.
This is because banks generally performed a final credit assessment before registration and could withdraw a home loan if a buyer’s financial profile had deteriorated, he said.
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