Things to consider when buying a house in South Africa

Buying a property is probably one of the biggest financial decisions you will ever make, so it’s important to make sure it’s a home run.

From budgeting, getting a pre-approved bond, finding the home of your dreams, signing an offer to purchase, doing a home inspection, all the costs involved and going through the registration process, our panel of experts, which included Keshnie July, Lending Product Owner at Investec and Tsholofelo Mokoma, Property Practitioner at RE/MAX Horizon, discuss everything you should consider.

Tsholofelo commented that the first step is pre-approved home loan with your bank to determine how much you can realistically spend, considering your credit rating. “The key is affordability. Do a full income and expenses analysis and know what you can spend on a home loan repayment every month. Is your bank offering you a competitive rate? If you have a healthy deposit saved, that should also be factored in.”

She also recommends that you should not buy at the top threshold of what you qualify for. The bond repayment should ideally not exceed 30% of your gross income per month with a buffer. So, if interest rates go up (and increases your monthly payment) you will be able to afford it.

“Once you have a pre-approved bond, it will speed up the home buying process. As a buyer, you can narrow down your search and only look at properties you can actually afford. From a seller's perspective, there is a comfort in knowing that the buyer is already pre-approved.”

Keshnie remarks that if it’s your first property, most banks in South Africa have a first time home loan proposition, including Investec. “That is meant to attract young professionals into the property market, so make sure you take advantage of these offers. We have a niche offering where you can capitalise your registration costs, your initiation and your valuation costs into your facility, with up to a 30 year term. We offer discounts on certain attorney fees and we offer competitive interest rates amongst other offerings. I think it's so important to understand what’s available to you as options.”

She adds that you should Look up your credit score on your credit bureau report to make sure you agree with everything that's been recorded. “What does your bureau score look like? Chat to your banker who can guide you on whether that is a good score to have or how you can also improve it.”

Although the process can be overwhelming, Keshnie adds that preparation is key. Even if you budget carefully and buy a property, there are often additional expenses you should factor in. “As a first time home buyer I thought I had covered myself from all angles. After successfully buying a property, all of a sudden I found out that I have access to a gas pipeline at an additional cost. Also, ongoing maintenance should be considered. Go in prepared and leverage the property experts and finance specialists at your bank. Then you know you have all your bases covered.”

Tsholofelo explains that the second step is to partner with the right property practitioner. Somebody who will take the time to understand what is important to you and who has knowledge of the properties available in the area you are interested in.

“We always encourage buyers to do their research and also be mindful of additional costs, such as transfer costs, moving costs, etc. It will make the home buying process so much easier,” she explains.

Once you have determined how much you can afford, then you can go house hunting. For Tsholofelo, buyers should look at their current and future needs when buying a house in South Africa.

“For instance, a young couple might want to have children, so proximity to schools will be important. For others, proximity to work will be critical. How much space do you need? A two bedroom apartment or a four bedroom house with an office? Do you need access to public transport and major highways? You might want to down size if you’re nearing retirement. Will this house ensure a good quality of life? Are there restaurants, gyms, malls, parks, golf courses, etc nearby?”

When you find a perfect match for you, you make an offer to purchase that is sent through to the seller who will consider whether that offer to purchase is acceptable or not.

Tsholofelo explains that it is important to arrange a home inspection and that's where the role of the property practitioner becomes critical.

“What is staying? What is going? Is the solar system part of this deal or is it not? Is there anything of sentimental value that the seller would like to take? These things need to be listed explicitly. According to the Property Practitioners Regulatory Act, there is a legal obligation to declare the defects correctly. Are there issues with the plumbing? If the buyer is not going to pay for repairs, the offer can be a bit lower than the asking price. That's where the negotiation process comes in.”

Once the offer is accepted, the registration process and paperwork starts and it can take six weeks to three months depending on the type of property.

The seller of the home will hire a conveyancing attorney to transfer the home to your name. Meanwhile, the bank hires a bond attorney to register the bond in your name. You will have to pay the transfer of property and bond registration fees. 

Once the bond has been transferred, the title deed is registered in your name at the Deeds Office. This confirms your ownership of the property. The bank will keep the title deed until you have paid off the home loan, although you can request copies of the deed from the Deeds Office at any time.

Depending on the type of property you would have bought, there will be additional costs, whether you buy a freehold or in a complex. A complex will have monthly levies. Property rates and taxes will be standard. There will be utility costs. You have to connect your electricity. Do want extra security? Do you want to do renovations?

Tsholofelo concludes, “The rule of thumb is that up to 10% of your purchase price will go towards these additional, ‘hidden’ costs. But, with a little planning, preparation and perseverance, you will be moving in and making the house your home in no time.”