Today’s’ decision by the Reserve Bank’s Monetary Policy Committee (MPC) to cut interest rates by 25 basis points, with the home loan lending rate now at 10% down from 10.25%, is welcome news for homeowners and would-be buyers.

Here’s what the property industry has to say…

Lower interest rate will stimulate housing market, says ooba

Bond originator ooba welcomed the rate cut and says on a R1 million home loan, this decision will save South African homeowners approximately R39 900 over a 20-year term. The saving will be R166 on monthly bond repayments.

“ooba expects the lower interest rate to stimulate the residential housing market as prospective home buyers will now find it easier to afford the repayments on a new home loan,” says Rhys Dyer, CEO of ooba.

“The current South African property market outlook remains cautiously favourable with moderate house price growth, relatively low interest rates and an increased appetite from the major lenders to lend.”

This will provide much needed stimulation for the market and after a very flat 2017, will hopefully be an “energy boost to encourage buyers and investors”.

Although largely expected, Seeff says it’s a welcome reprieve for consumers and property owners who face higher living costs due to the 1% VAT hike taking effect on the 1 April.

He says the election of Cyril Ramaphosa as President of the ANC and of SA has been a positive development for country, economy and property market. Action around State Capture, the prosecution of Jacob Zuma and the Cabinet shuffle to return confidence to major sectors of government have all been well received by the market, business and the ratings agencies.

Currently, inflation is at around 4% which is within the Reserve Bank’s target range of 3% to 6%. The rand also continues to perform well, although it is always subject to a degree of volatility.

While the outlook for 2018 is much better than last year, it remains largely a buyers’ market for the time being and sellers need to maintain a more conservative approach in their price expectations.

On the upside, the last year has seen lots of new stock come onto the market and he says it is an excellent time to buy property, especially if it is your primary home. “Prices have remained fairly flat over the last 12 to 18 months as the market took a breather and there are many motivated sellers.”

This interest rate cut is a great incentive for hesitant buyers and there is no reason to wait, it is a good time to buy, he says.

Rate cut a further boost for market sentiment

Today’s announcement coupled with Moody’s decision to not only leave South Africa’s credit rating unchanged at one notch above junk status, but to also upgrade the outlook from negative to stable, are positive factors which should provide welcome stimulus for the residential property market

“These announcements are favourable for consumers and market sentiment. Firstly, with Moody’s decision another cloud of uncertainty has been lifted from the local economic landscape. The news reinforced recent rand strength and, since it follows a better than expected inflation release for February – with the inflation rate easing to just 4%, marginally below market expectations – this strengthened the case for an interest rate cut.”

The repo rate reduction to 6.5% is the first cut since July 2017 and based on the views of economists and various market commentators, interest rates are now likely to remain unchanged at this level for the remainder of the year

“While SA’s economic prospects have improved since the recent change in political leadership, growth forecasts remain relatively subdued and with consumers facing the prospect of a 1% hike in the VAT rate from April 1, the case could be made for a further modest easing in interest rates.”

Interest rate cuts are always positive for the housing market. “However, the benefits of this modest reduction may take longer than usual to be felt as households will need to adjust to the hike in VAT and the general increase in the tax burden via the fuel levy and other tariffs such as electricity, water and property rates.”

“Buyers continue to demonstrate a willingness to embark on first-time acquisitions as well as properties for upgrading or downsizing, or simply relocating, depending on their individual requirements.

“Not surprisingly, the demand for convenient, lock-up-and-go hassle-free sectional title units accessible to the workplace and all amenities proceeds unabated, while the appeal of secure estate living with a range of value-add benefits on hand such as outdoor, sports and leisure activities, beckons to a cross-section of home buyers.”

The property market can expect a “very healthy surge”

“Any type of easing in interest rates will encourage individuals to get involved in the property sector, as well as bring relief for current bond holders in that it will have two possible effects: it could either create additional disposable income in their budgets, or it will allow for a higher than required bond repayment, which can, in essence, take years off your bond.”

Greeff says a lower interest rate is also a positive for the banking sector, as it will create an influx of customers applying for home loans. “These clients are willing to enter into long-term commitments with banks and lending organisations, which would guarantee income stability for the next two decades at least.”

He says the rate cut as it is sure to create increased demand for property, stimulate the economy and will allow more buyers to consider property as an investment as opposed to just residential purposes.

South Africans won a small victory today

Leading up to the announcement, the general consensus was that rates would in all likelihood be lowered. This was based on the sentiment that the country had seen a succession of good news in the last quarter. Also, recently, the RMB/BER Business Confidence Index revealed an 11 point increase for the first quarter of 2018, moving the country to a reading of 45 points – the highest level reached in three years.

Now was the perfect opportunity to stimulate the economy with a rate cut, says Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett. “Leading up to today, there have been many encouraging signs and consequent offshoots that have impacted the economy positively. We applaud the decision of the MPC to make the cut, as we believe that this will continue to stimulate growth and strengthen investments.”

With the VAT increase set to take effect in April, a lowered interest rate also alleviates some of the financial strain consumers are bound to face during this time.

“The rates cut provides consumers with some much-needed financial relief. Shrewd citizens will use this opportunity to save for future investments, or reroute the money they’re saving straight back into their bond repayments,”

If you are fortunate enough to own a piece of land in an urban area or prefer to buy a stand and build the house of your dreams from scratch, there are a few important factors to consider when applying for a building loan from your lender.

You can apply for progress payments at any stage during the construction process, provided that sufficient work has been completed and the bank is satisfied with the progress.

Marius Marais, CEO of FNB Home Loans, says although the process of securing building finance differs slightly from a traditional home loan, it is still governed by the National Credit Act and the same banking policies and lending criteria still apply.

When applying, he says you will need to use one of the channels available and ensure you have the following documents:

– A quotation from a builder who is registered with the National Home Builders Registration Council (NHBRC)

– Building plans and a supporting schedule of finishes

– A contract between the builder and yourself

Furthermore, a minimum 10% deposit which takes into consideration the value of the land, plus a contract amount may be required upfront.

Marias says once the building loan application has been approved, the land transferred into your name and the bond registered, there are a few important factors that you need to take note of:

1. The loan will be offered in stages, through progress payments, until the building has been completed. The facility will then be converted to a normal 20-year home loan.

2. Building must commence within 3 months after registration of the bond and completed within 12 months to avoid penalties.

3. The building contractor should be insured for unforeseen events through Contractors All Risk Insurance Cover for the duration of the project. The onus falls on you to take out Home Owner’s Cover once the building has been completed.

4. The builder must enrol the project with the NHBRC, which provides a five-year warranty over structural defects from the date of occupation.

5. It is your responsibility to ensure that the builder understands and complies with all the bank’s conditions of the loan.

6. Prior to any progress payment being paid out by the bank, a valuer should inspect the building progress and report back to the bank.

7. You can apply for progress payments at any stage during the construction process, provided that sufficient work has been completed and the bank is satisfied with the progress. A maximum of six progress payments are often allowed, based on the work completed. Additional progress payments will attract a fee.

8. You need to pay interest on the drawn building loan balance until the project is completed, with normal interest payable thereafter.

9. Once the building work has been completed, you need to confirm that you are satisfied, and at this point, you could provide a list of snags to be fixed. It is important that this is communicated to both the builder and the bank.

10. A retention amount may be withheld in order to ensure that the builder completes the outstanding work.

It is advisable to consult an attorney prior to signing any agreements with the builder, as these can potentially work against you in future. 

Marias says should you decide to change the building contractor or make any drastic changes to the original plan, you need to inform your bank. The bank may reassess the facility and either approve or disapprove the request, based on how it impacts the overall building costs and market value of the property, he says.

There are many factors landlords need to consider before escalating a tenant’s rental rate.

Tenants must also understand that the cost of owning the premises increases annually for the landlord and that one cannot expect to rent the premises for the same price year-on-year

A reasonable rental escalation rate is generally anywhere between 7% and 10%, but that this also depends heavily on the rental market’s demand for the property and similar properties, the increase in cost of maintaining the premises and the market value of similar properties.

“It is extremely important to take note of what similar properties are rented for in the market place, because it will not be wise to lose a good paying tenant by overpricing your property at the time of escalation”.

Van der Linde adds that the landlord is responsible for paying rates and taxes, but when these costs increase it does not imply that the rental payable by the tenant must increase by the same rate.

“A landlord’s number one priority is to have a good paying tenant that looks after the premises and that abides by the terms of the lease agreement. If a landlord has such a tenant my advice would be to make it attractive for the tenant to continue renting the premises by giving a discounted escalation rate.

“Tenants must also understand that the cost of owning the premises increases annually for the landlord and that one cannot expect to rent the premises for the same price year-on-year. I believe it is important to negotiate an escalation rate that benefits both parties to the agreement as this will contribute to a healthy tenant-landlord relationship”.

There are factors like demand for rentals in the specific area, demand for property in that rental price range, demand for furnished or unfurnished property and estate property versus suburban property also play a key role when determining a rental increase.

“The increase percentage or how the increase is calculated will usually be specified in the Lease agreement”

Many a time, landlords and tenants have butted heads when it comes to the ‘move in’ or ‘move out’ inspection.

A tenant has seven working days after taking the keys of a rental property, usually post-paying the first month’s rent and deposit, to inform the owner or the agent of repairs needed at the property or of anything that was not mentioned in the ingoing inspection.

“Either party may try to remove themselves from responsibility for any problems or damages,” “The best way to avoid any conflict or dispute, however, is to have a thorough inspection report done when moving in, renewing or renegotiating a lease, and when moving out.”

If a landlord opts to use a managing agent for the rental of his or her property, the inspection process can be easier as the agent is not emotionally involved and will certainly have concluded an in-depth inspection report in the interests of all parties.

A good inspection report should adequately document the following:

– Any nails in a wall
– Any defaults, defects, or marks/stains
– Any particular fittings or features and their condition
– Photographic evidence of any faults, as well as the general state of the entire property

“By taking photographs to correspond with a written description on any of these factors, it makes it near impossible to dispute the condition of anything within a rental property, provided the photos are clear,” says Muller.

Keep in mind that some tenants might accept small faults, but whatever the condition, it must be documented as a detailed – and accurate – inspection report, helping to manage expectations and keeping the situation honest and fair.

Tenant and landlord obligations

Muller says that tenants are obligated to inform landlords, or managing agents on behalf of a landlord, about any issues that come up in the lease period.

“Landlords need to be given the opportunity to make any repairs to their property, however, they are not obliged to make cosmetic repairs,” she says. “If a landlord or agent has no idea about a damaged wall, for example, the tenant can be held liable for the repair costs, even if the damage is not the tenant’s fault.”

A tenant has seven working days after taking the keys of a rental property, usually post-paying the first month’s rent and deposit, to inform the owner or the agent of repairs needed at the property or of anything that was not mentioned in the ingoing inspection. “Any changes must then be added to the inspection report,” Muller says.

Foreign landlords, or those who cannot often visit their properties should really have a managing agent to assist them. “Those who prefer not to use an agent, or those who can visit their property, should do so on an ad hoc basis within the period of the lease, and must, of course, do an inspection at the time of renewal.  It is very important that a property be checked up on at least once annually to make sure the condition is still the same, and that only fair wear and tear has occurred,” she says.

Wear and tear can be a tricky business, making the inspection report all the more essential. “To assess how a tenant might become liable would be to look at a new carpet, for example,” says Muller. “If a brand-new carpet with an estimated lifespan of 20 years is installed for R25 000, this could be recorded in the report at R1 250 of depreciation per year, by dividing the cost by the lifespan. So, if a tenant on year four moves out and has left a huge stain on the carpet, which is clearly not just wear and tear, the tenant would be liable for a R20 000 carpet replacement.

“Photographs of the carpet at the time of moving in can become quite valuable at this stage. Comparing these to the photographs of the condition of the property at the move out inspection assists in the verifying of the claim.”

Home improvements 

Tenants may also make additions to a property if the landlord approves them in writing, and depending on what these are, in some cases tenants are expected to bear the costs to restore the property to the same condition as when they moved in, or to leave any improvements made behind when they move out, with no compensation.

“The tenant must return the property to the landlord in the same state as the tenant received it,” Muller adds. “The deposit is used to cover any repairs that the tenant may be liable for.”

If the deposit does not suffice, however, to cover any damages, excess claims will have to go to the relevant small claims’ court. The report can go into as much detail as you like – and really should, if a furnished property is being rented out.

“A qualified, respectful tenant who maintains your home can go a long way, and an inspection report is the ultimate supporting document protecting both landlords and tenants under any circumstances,”

Eskom has recently submitted a new application to the National Energy Regulator of South Africa (NERSA) to raise electricity prices by 30%, which may mean that South Africans could see substantial hikes in their monthly electricity costs before the end of 2018.

A larger installation, which includes a solar photovoltaic system, heat pump, energy storage and energy management system can shrink the home’s total monthly energy costs by up to 80%, says Van der Westhuizen.

Cala van der Westhuizen, Head of Marketing and Sales at Energy Partners Home Solutions, a division of Energy Partners and part of the PSG group of companies, comments that the financial burden on consumers in relation to utility tariffs is becoming unsustainable.

“The increases that South Africans have already seen in the price of electricity over recent years have consistently outpaced the rate of inflation. With an even higher price increase now under discussion, it is becoming vital for homeowners to consider alternative sources of electricity to power their homes. Unlike coal-fired power, alternative energy solutions have become exponentially more affordable and accessible to consumers.”

According to van der Westhuizen, the average home’s electricity spend can be reduced considerably through the use of innovative energy efficiency and alternative energy solutions.

“Homeowners can use their own discretion as to how much they want to save and invest in energy efficiency, but most will find that even small changes could make a noticeable difference. Simple measures like replacing the home’s regular light bulbs with energy efficient LED lighting can already cut the average household’s monthly electricity bill by as much as 30%. More advanced options like replacing the conventional geyser with a heat pump and hot water storage solution can reduce the home’s reliance on the national grid by up to 50%.”

Van der Westhuizen says that a larger installation, which includes a solar photovoltaic system, heat pump, energy storage and energy management system can shrink the home’s total monthly energy costs by up to 80%.

Simple measures like replacing the home’s regular light bulbs with energy efficient LED lighting can already cut the average household’s monthly electricity bill by as much as 30%.

“Even though renewable energy is becoming more affordable and will result in future savings, initial installation cost is still one of the major challenges for most homeowners. A fully integrated solution will cost anything from R80,000. Luckily, there are various types of financing available which make these solutions accessible to consumers while still achieving significant savings each month.”

Van der Westhuizen advises all homeowners to evaluate their home’s energy needs and to find out what renewable energy solutions will work for their home. “An energy solutions service provider can provide an accurate assessment of not only what the home needs, but also which solutions would be the best suited for the home – whether this is a rooftop solar installation, heat pumps or other options.”

Energy Partners Home Solutions offers customised solar solutions, as well as various financing options for consumers. “As a registered financial services provider, many of our clients purchase systems that are financed by us and which they can easily pay off over time,” says van der Westhuizen.

For more information, visit www.poweryourself.co.za.

While there are some things like property prices, crime in the area and the interest rate that are out of your control, there are also many affordable and easy ways to enhance your property’s value.

Ways to boost your property’s value

1. Ensure that regular maintenance to the property is undertaken at all times.

2. Repair small problems like roof tiles, leaking taps and gutters, and replace bulbs in light fixtures and vanities.

3. Ideally, you should have a maintenance plan which is regularly actioned to ensure that you don’t fall behind with minor (but important) repair work.

4. Check things like peeling paint, roof leaks, cracked tiles, cracks in plaster, damp, leaking toilets, broken cupboard latches, leaking gutters and broken fascia boards. You also want to look into the silicone around baths and showers, light bulbs and cracked windows before show days. If these are not in good condition it could create a bad first impression.

5. Replace outdated fittings from time to time, like upgrading door handles, light switches and light fittings.

6. Keep the driveway neat and tidy at all times and consider minor renovations if necessary.

7. Maintain the garden and make sure that the lawn is mowed regularly. The swimming pool should be clean and the water clear.

8. Carpets should be cleaned on a regular basis to avoid unpleasant smells, especially if you allow pets in the home.

While some of these tactics may cost a little money upfront, in the long run it will be worth the investment.