Make 2023 the year you become a homeowner. Here are some things you need to consider that will help you buy your first home comfortably and happily.
Save for the biggest deposit possible
Buying your first home is a significant financial decision. Before you commit to 20 to 30 years of instalments, take an honest look at your current finances, including any short-term debt you could reduce and any savings you have. Most home loan agreements will require a deposit of at least 10% of the purchase price, however the bigger your deposit, the more you save on interest in the long run.
Berry Everitt, CEO of the Chas Everitt International property group, advises younger buyers: "When buying a home, sooner, is always better than later, because whatever the interest rate is, the steady rising of home prices will always mean that you need a bigger home loan this year than you would have needed last year, to buy the same property, and a higher salary to qualify for that loan."
Reduce short-term debt & pay more than the minimum amount
Banks look at your debt-to-income ratio to see if you will have enough each month to handle a home loan payment in addition to your monthly debt payments. If you work on reducing your short-term debt, you will also be able to pay more than the minimum amount on your bond repayments.
Since November 2021, the Reserve Bank has increased interest rates by a cumulative 3.5%, taking the interest that commercial banks charge on home loans (known as a prime lending rate) from a near 50-year low of 7% to 10.5%.
Buying is still better than long term rental
The past couple of years have seen a rapid increase of first-time home buyers, as well as existing homeowners upgrading into more spacious and luxury homes. The value of property sales in South Africa more than doubled in 2021. The predictions for 2023 is for house prices to soften, and the approval ratio for first time buyers is still looking good and banks will start to fight harder to offer better pricing to clients on interest rates.
First time buyers are more sensitive to interest rates, and affordability plays a bigger role. The market in the price bracket above R3 million is less sensitive to rate hikes, and investors are effected more by economic conditions and business confidence.
Plan for a home office
The way we are working has been reinvented, as is clear from a CNN Business article's recent headline "The office, as you know it, is dead." According to the article the pandemic proved that employees don’t need to work in office cubicles to be successful. This has become a very important factor for many more prospective home buyers.
Related article: Buy Property in Napier – Escape the City and Work Remotely
Consider a country property
Semigration has been a buzz word now for a year or two, and many people moved from the city to buy a home in the country. The general consensus is that the Western Cape will continue to out perform the rest of the country. Especially the areas with well run municipalities like the Cape Agulhas Municipality. CAM was recently rated as the best local municipality in the country by Good Governance Africa (GGA) on the Governance Performance Index (GPI). The prime purpose of the GPI is to reflect the importance of good governance at the local municipal level and GGA has designed it as a tool to influence national-level policy that can improve local governance. (Read full article)
The country towns Napier and Bredasdorp, along with coastal areas Arniston, Struisbaai, L'Agulhas and Suiderstrand offer buyers the opportunity to live a mere 2 hours away from the city, working from home and still being close enough to go to the office if needed. Berry Everitt, CEO of the Chas Everitt International property group said, "We are thus not surprised that more employees, as well as executives, are now seriously exploring the idea of moving away from a big metro to a smaller town or an estate in a more rural area. This pandemic has been a wakeup call for many people and families who are now seriously reassessing their priorities, and seeking ways to make permanent changes to achieve a lifestyle that is less rushed and stressed, and we see this reflected in a significant increase in enquiries for country homes.
Get the help of a property professional
We suggest that you find a Property Professional to guide you through the home buying process. As Property Professionals we can make this process easier because we will work for you and provide the exact information that you need.
Related article: Choosing the Right Property Professional is your First Step