 Human Settlements Minister Mmamoloko Kubayi recently came under fire for her comments on “discriminatory practices” in the banking sector’s home loan application process.
“There’s a massive housing backlog in South Africa and yet the officials tasked with solving the problem are too busy race-baiting to do much about it,” says Renier Kriek, Managing Director of Sentinel Homes. Much has been reported on how the Minister’s statistics, presented at the briefing, do not match her conclusions. The Minister’s plan to change the law, forcing banks to explain why they rejected a loan to any previously disadvantaged person, sidesteps the real issues in both housing supply and demand, and therefore any meaningful solution. Credit providers are profit-driven, not racially motivated Banks are profit-seeking enterprises that make money from awarding credit, not denying it. Because home loans are a major source of their income, it makes sense that they are incentivised to grant as many as possible. “It is not only implausible, but also downright ridiculous to believe that there is some racially motivated cabal operating from back rooms at banks and credit providers for ends that are inimical to the profit-seeking motive of those businesses,” says Kriek. Since every application is a potential source of revenue, no credit provider will turn someone away who has a good credit record and disposable income, regardless of their race, gender or disability. “Apartheid placed ideology before profit but in our democratic economy, any enterprise that turns down good money over prejudice will soon go out of business or be exposed by whistleblowers from inside,” says Kriek. The National Credit Act compels banks to reject risky applications The only reasons for banks to reject a home loan application are because it would be bad for business or they are compelled to do so by the National Credit Act or other regulations. The NCA clearly prohibits awarding credit to an applicant who does not have the financial means to repay it, is already over indebted, or would become over indebted because of the loan. It also already compels banks to furnish the dominant reason for the rejection to an applicant who requests it. The Minister’s proposal for disclosure introduces nothing new and given her team’s apparent statistical illiteracy has little chance of making any impact. Banks that recklessly award credit put themselves at risk because the loan contract could easily be overturned by a court. Changing the Act will only sow confusion and accomplish nothing except add to an already immense regulatory burden. But, it might also expose the government’s lack of initiative in solving the affordable housing backlog in any realistic way. “Does the government plan to levy penalties on banks who reject loan applications in compliance with the law or common business sense?” asks Kriek. “Because any such penalties or additional compliance costs will become part of the cost of doing business, passed on to customers, and exacerbate the affordability problem.” Real solutions Real steps toward clearing SA’s apparent housing backlog are multifaceted, but require politically expensive interventions on both the supply and demand side of the market. On the supply side, the government has been relatively successful with the RDP programme, which has housed millions of South Africans since its inception. However, the so-called gap housing market, which comprises the 30% or so of households who do not qualify for an RDP house and are also not wealthy enough to be meaningful participants in the open market, is being left behind. Many of these households in the gap market segment continue to live in shacks or other informal arrangements despite being middle income households and have little future likelihood of entering the formal market. Home loans to these households makeup no more than 10% of home loans granted, but should in fact be at around 50% if the market were functioning efficiently. Foreclosure and legislation According to Kriek, the most impactful solution to the housing crisis would be to remove the constraints placed on the holders of private capital in the residential property market, especially in terms of foreclosure and eviction. As President Ramaphosa has rightly put it, the private sector has money that can be deployed to meet the demands of our country and should therefore be enlisted through proper incentives. After World War 2, he explains by way of example, Northern Europe faced a severe housing shortage because of infrastructure destruction, which was solved in most of those countries by relaxing consumer safeguards. Because it was easy for banks and developers to protect their interests, and cheap to take a chance on some otherwise doubtful consumers, they invested heavily in the provision of housing. This quickly rehoused the population. And once the population was housed, the governments gradually started reintroducing consumer safeguards. In South Africa, even though housing remains a problem, foreclosure restrictions and courts that unduly and unnecessarily favour defaulting homeowners or tenants deter banks, developers and landlords from making substantial investments in housing. This limits supply, as can be seen from market statistics. “We need to urgently review our current foreclosure and eviction legislation and procedures because, in the long run, it would unleash massive investment into the property market, resulting in a jobs boom in the construction industry, and ample housing for all,” says Kriek. “With a Government of National Unity touting that the private sector is key to the project of regeneration and economic growth, ministers should leave the race-baiting to the populists and work with the private sector interests to make a non-racial South Africa that works for its inhabitants a reality at last,” he concludes. “There is more than enough money available in the world, it is simply a question of harnessing it properly.” ENDS MEDIA CONTACT: Stephné du Toit,[email protected], 084587 9933, www.atthatpoint.co.za For more information on Sentinel Homes please visit: Website: www.sentinelhomes.co.za Facebook: Sentinel Homes
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 Love springs eternal but all marriages end - often in divorce but definitely in death. It’s a sobering thought, especially if you’ve recently been down on one knee or held out your ring finger.
“If you own or intend to buy property for habitation, business or investment, you need to consider the implications before tying the knot,” says Renier Kriek, Managing Director at Sentinel Homes. Let’s look at the different types of marriage and what you need to know to protect your assets once the fairytale ends. In community of property By law, without an antenuptial agreement, South Africans are automatically considered to be married in community of property. Any properties you owned before marriage or acquired afterwards belong equally to you and your spouse. They can also be attached to pay off your spouse’s debt, and you can’t sell them or buy more without your partner’s consent. At divorce, any properties and other assets are divided equally and on death, a surviving spouse may inherit them if they are bequeathed in the deceased spouse’s will. It also doesn’t matter who paid the bond - this form of marriage determines who gets what in the end. Who paid for the home or other asset is irrelevant. “I don’t know an attorney who would recommend this model of marriage to their clients,” says Kriek. “It’s impractical to have the parties bound at the waist as neither can act commercially without the other’s consent. In addition, it’s poor risk management because all the assets are exposed to either party’s actions.” Out of community of property without accrual Historically, the growth of antenuptial contracts threatened to leave financially inactive spouses with nothing at divorce. Therefore, by default, South African law imposes an accrual system on marriages out of community of property. For total financial independence, your antenuptial must explicitly state that accrual is excluded. This is called the “cold exclusion.” If married by the cold exclusion, all the assets you acquired before and during marriage remain yours and cannot be attached to your spouse’s debts. You can also buy and sell property without their consent, and engage in commercial activity unfettered by the bonds of matrimony. At divorce, you leave with all your assets and just have to worry about disposing of jointly purchased property. On death, the surviving partner gets only what was bequeathed to them. This model is ideal for couples who want to retain their financial freedom, grow their wealth independently, and protect their assets from each other’s creditors. Just remember that maintenance claims are potentially open to all spouses on the dissolution of the marriage, even if the parties chose the cold exclusion. “For entrepreneurs and investors, it protects their business portfolio while sparing their partners the financial risks they willingly take on,” says Kriek. Out of community of property with accrual Without an accrual exclusion clause in your antenuptial agreement, the accrual system automatically applies. Assets you owned before and those acquired after marrying remain yours alone, cannot be attached to pay creditors, and you are free to buy and sell property at will. However, at divorce or death, a person can claim half of the difference between their estate and their spouse’s higher-valued estate. In effect, it’s “in community of property” at the end without all the restrictions during the marriage “It ensures both come away equal, and allows for one spouse to take time off to rear the children, or for one to work to put the other one through school or university, even though they are married out of community of property. This is because, in the end, there will be a divvying up of assets. However, it could still mean losing the property you owned separately,” says Kriek, “because assets may be sold to cover the accrual payment due on the dissolution of the marriage.” Get legal advice Never assume there’s no such thing as a common-law spouse in South Africa. Even a life partner may gain ownership of your assets, without any formal ceremony or registration. If you are buying a property with a life partner or other romantic interest, please be sure to have a partnership agreement drawn up by an attorney. “Do the smart thing and get advice from your attorney on the best way to proceed; a contract may seem unromantic when wedding bells are ringing but it will protect you both in the long run,” says Kriek. “It’s just the sensible thing to do.” ENDS MEDIA CONTACT: Stephné du Toit, [email protected], 084 587 9933, www.atthatpoint.co.za For more information on Sentinel Homes please visit: Website: www.sentinelhomes.co.za Facebook: Sentinel Homes  Whether you’re buying property for business or to live in, you’re going to pay taxes at various stages of ownership.
“Owners - especially first-time buyers - need to be aware of their tax obligations and plan their property investments accordingly,” says Renier Kriek, Managing Director at Sentinel Homes. Unfortunately, tax is often overlooked, so here’s an overview of what you need to know. When you buy When you buy a property, you will either pay VAT or transfer duty, but never both. VAT is charged when a VAT-registered business sells a property, typically as a new residential development. Transfer duty, on the other hand, is levied when buying an existing residential property from its owner. Importantly, transfer duty cannot usually be financed through a home loan, so you’ll have to come up with the money yourself. On higher priced properties, transfer duty can run into the hundreds of thousands. “With a new property, VAT is included in the purchase price, so it is already covered by your loan,” says Kriek. “For first-time buyers, a new property can be much easier on their pockets.” It’s also important, when shopping for property, to keep in mind that new properties are cheaper at the same advertised price than their second-hand competitors, due to the impact of the transfer duty. For as long as you own Once you take ownership of your property, you’ll immediately start paying municipal taxes. Whereas transfer duty and VAT are paid over to SARS, municipal taxes are used to fund city services, infrastructure and salaries. “When planning to buy, you should consider how this tax will impact your monthly cash flow,” says Kriek. “We have, startlingly, had several clients who were surprised to learn that they will receive a monthly tax bill on their new home. The municipal tax is in addition to consumption charges for water and electricity and expenses like levies payable to the body corporate or homeowners’ association.” When you sell If you sell your property, you’ll pay capital gains tax (CGT). This is where things get a bit complicated. CGT is calculated on the difference between what you paid for a property and what you’re selling it for. Individuals are taxed on 40% of this profit at their marginal tax rate when it comes time to declare their annual income to SARS. However, if this is your primary residence (i.e. your home), the first R2 million of your profit is tax free. There are a few catches though. For example, perhaps you initially rented out the property but then moved in to live there permanently before selling it. In that case, the R2 million allowance must be divided proportionately between the period you rented it out and the period you lived there. And you won’t be able to claim that first portion as tax free. Another instance is where you claimed a deduction for a part of the property used for business, such as a home office. You will also have to subtract this part from the allowance. Trusts and companies, on the other hand, pay tax on 80% of their capital gains and don’t benefit from a primary residence allowance. This seems, on the face, to provide valuable incentives not to own your primary residence through an entity. However, the estate duty implication and the effect on the cost of administering your estate should also play into the consideration of the correct structure. Secondary properties, such as a holiday home, also don’t benefit, even if you do reside there occasionally. When you pass When you die, you will have to pay estate duty on the value of your estate above R3.5 million, rendered unto SARS by your estate administrator. Any property disposed of at this time will attract CGT, and the same exclusion allowance is applied to your primary residence. If your estate cannot cover your debt or tax obligations, your property may be sold to raise the necessary cash. There are several methods to protect your property against such a loss. You could take out extra life insurance to cover the tax liability. Or, you could sell your property to an estate planning vehicle, such as a trust or a company, at the earliest opportunity, in order to cap your eventual tax liability. Although you’ll pay CGT on the profit from that sale, any future property value increases will be on the balance sheet of the entity, not your own, thereby escaping an otherwise increasing estate tax liability. And since trusts and companies don’t die, you can avoid CGT in perpetuity when you do - to the advantage of your beneficiaries, of course. When you earn income If you earn income from any source other than employment, you must pay provisional tax. This includes income from renting out your property. Provisional tax requires that you estimate your non-employment earnings for the year and pay tax on half of those earnings at the end of August, with the balance due at the end of February in that tax year. When you declare your total annual income, any provisional tax paid during the year is deducted from your assessed tax. “Just estimating what you’ll earn in the coming year can be stressful and calls for the services of a professional tax advisor or accountant,” says Kriek. Starting out right The sheer complexity of tax on property and the methods of managing that obligation cannot be covered fully in a single article. For this reason, it is essential to carefully plan your property purchases around both financing and tax. “Especially for high value property investments, such as total property values exceeding R2 million, you definitely need to engage the services of estate management and tax planning professionals,” says Kriek. ENDS MEDIA CONTACT: Stephné du Toit, [email protected], 084 587 9933, www.atthatpoint.co.za For more information on Sentinel Homes please visit: Website: www.sentinelhomes.co.za Facebook: Sentinel Homes  The significant decline in the number of people who can keep their mortgage accounts up to date clearly illustrates the level of financial distress consumers are currently experiencing.
Historically around 92% of all mortgage accounts were up to date, but it has been dropping quite dramatically in recent times. The latest available figure shows it is down to 88% in the last quarter of 2023. That means home loan accounts with arrears have increased by about 50% recently, and it happened in the relatively short time span of 18 months to December 2023. Globally inflation has been quite stubborn and interest rates remain high as a result. In South Africa the repurchase rate (repo rate) of the South African Reserve Bank reached its highest level in 15 years, says Renier Kriek, managing director of Sentinel Homes. This means the prime rate, used to price home loans and other consumer debt like car loans and credit cards, is elevated. High inflation, and the high interest rate response, has been caused by a confluence of factors including the hangover from previous quantitative easing, supply-chain bottlenecks during the Covid-19 pandemic, the Russia-Ukraine war and the recent conflict in the Middle East. Despite earlier predictions that the high interest rate cycle could turn around in May this year it is now only expected next year due to high inflation proving stickier than anticipated. “Being unable to afford your home loan instalment is not a position anyone wants to find themselves in. Steer your own boat rather than leaving it to the vagaries of the foreclosure process. Not taking control of the situation can be financially disastrous,” advises Kriek. Prevention better than cure He urges homeowners to come to an agreement with their home loan credit provider before they miss the first payment. Stick to the arrangement. Do not over-promise and under-deliver. “If you couldn’t make an arrangement in advance of missing a payment, and you’ve already fallen into arrears, pay something toward the debt immediately. Just pay anything you can and keep on doing that as a launchpad for negotiations with your home financier.” Accounts that are receiving payments are less likely to face hand-over and foreclosure than accounts receiving no payments. “Do not let unreasonable hope be the enemy of your future financial well-being,” he adds. If the cause of your financial distress is unlikely abate within a reasonable time, call it a day and list the property for sale with an estate agent. Be realistic and pro-active. He recommends that distressed homeowners market their property before the home financier’s attorneys come knocking, ensuring a better return on the sale. “You will also avoid a slew of additional costs once the bank starts with the foreclosure process. These only serve to make your poorer, adding insult to injury.” Some people, particularly men in Kriek’s experience, tend to be too proud to discuss financial matters with family and friends. Many families are caught by surprise when there is suddenly talk about foreclosure, having missed the opportunity to assist along the road. “Reach out to the people you love and trust, there may be a lifeline from someone who will understand your circumstances and can assess the situation with much higher fidelity than a remote credit provider.” Forbearance before foreclosure Credit providers may be willing to assist a distressed homeowner by offering a payment holiday or by granting an interest-only period. It may also be possible to spread any existing arrears over a few months ‘repayments or extending the term of loan. This is especially true when the bar to payment is temporary, such as hospitalization or sudden retrenchment It is also important for consumers not to fall prey to over-enthusiastic debt counsellors. Many unscrupulous operators in that industry market debt counselling as a cure for all debt related ills. Entering debt counselling may not, in fact, save your home, but may still have a potentially disastrous effect on your future finances. For instance, debt review stops you from taking any new debt for several years while the debt review is completed. Kriek says there is a general misconception that home loans are “money-spinners” for home loan companies such as the banks. It only takes a couple of missed payments for home loan provider to be “under water” with a home loan. Do not labour under the misapprehension that you are doing the bank a favour by having a home loan with them – the home loan itself is not a very lucrative proposition. Nevertheless, the fixed costs of originating new home loans are quite high. Banks, home loan or credit providers generally prefer to rehabilitate existing customers rather than terminating the agreement, foreclosing, and then having to originate new debt. Take all opportunities to steer your own boat off the foreclosure rocks. Your finances cannot afford to be shipwrecked there. ENDS MEDIA CONTACT: Rosa-Mari Le Roux, [email protected], 060 995 6277, www.atthatpoint.co.za For more information on Sentinel Homes please visit: Website: www.sentinelhomes.co.za Facebook: Sentinel Homes  The single woman’s guide to buying their first home
Almost 60% of South African homes are owned or co-owned by women, and women are increasingly buying property without a spouse or partner. “Many will be first-time buyers who are hesitant to commit because they feel they are unable to afford such an investment,” says Renier Kriek, Managing Director at Sentinel Homes. As someone who deals with single or unmarried property seekers regularly, Kriek offers some good advice to help you find the best way to finance your purchase. Rise of the female homeowner As modern family dynamics change, one demographic indicates that more than 40% of South African children now live with their mother only. This is greater than the number residing with both parents or another related adult. “Traditionally,it is believed that homeownership is one way to create the stable and secure setting that is conducive to childrearing. This cultural attitude, coupled with demographic changes, may explain the surge in women buyers,” says Kriek. Yet, buying a property on a sole income can be daunting for anyone, regardless of gender, especially since property prices have risen faster than salaries over the past 70 years. However, Kriek warns that once the practical results of the election have become clear and the long-anticipated interest rates cut has arrived, pent up demand will surely unleash a buying spree that sends property prices skyrocketing. Buying now, before the market rises, is probably preferable to buy now, especially for those buyers who must stand on their toes to buy a property in the first place, such as single men and women who only have the benefit of one income. “With the current buyer’s market, it is the ideal time to invest in a home that’s still affordable,” he says. Buying a home on a solo budget To find the best property, you first need to decide how you will pay for it. Here are some great tips to consider: Your primary concern is how much you can get together for your investment. This starts with an honest assessment of your financial position and credit record, since you will likely need to apply for a bond, which may require a substantial deposit. Then, do your research to discover alternative financing solutions. For example, the government’s First Home Finance subsidy offers qualifying applicants free financing that can be combined with other housing products, like mortgage loans. The options are out there, you just need to find them. However, don’t be tempted by shady loans that make getting into debt easy but whose crushing rates will eventually leave you penniless - and maybe even homeless. Next, implement sensible lifestyle changes. Now is a good time to start paying off lesser debts to free up disposable income and improve your credit rating. Also ask yourself which expenses you’re willing to live without, like your Netflix subscription or weekend takeaways. It all adds up. Ask your employer if they provide assistance with property purchases. For instance, some banks may offer certain staff home loans with low or no deposit, and some employers may offer formal or informal programs of assistance to those who wish to buy. Most importantly, be aware that every property comes with initial and monthly costs, some obvious and some hidden. Upfront, you’ll face transfer and registration fees, and transfer duty. Then, there are the ongoing and adhoc costs, such municipal costs, sectional title levies and consumption costs. You are also responsible for home maintenance and repairs, and other infrequent expenses that don’t normally affect renters. Make sure you work these into your calculations. Getting value from property Now, consider the best type of property to buy. Most single people prefer a lock-up-and-go home, like a property in a sectional title complex. Currently, sectional titles make up more than half of the properties in the country due to their excellent value-for-money proposition. For instance, they allow you to enjoy many of the benefits of a free-standing property, albeit in a communal setting. The cost of security, gardening, property maintenance, a swimming pool and entertainment areas, and more, is shared among owners, making these amenities affordable and accessible to each. “Given the demand, this is also the easiest property to sell when your lifestyle needs change, again making it the best for a first-time owner,” says Kriek. If your employer is open to you working remotely, or you can run your own business remotely, you may find better value in rural areas or the countryside. In such regions, your bond might be cheaper than your current rental, so keep an open mind. Also, determine if the property could somehow pay for itself. A granny flat or spare room that can be rented out for additional income certainly helps to ease bond repayments. Lastly, buy with the end in mind. One day, you may want to sell your starter home for the highest price you can get. To ensure its value keeps pace with the market, look at the basics most buyers demand, such as its proximity to schools, shops, hospitals, daycare and similar amenities. Also, try not to buy property in declining areas – low prices may in fact be a value trap. The rewards of due diligence As a single woman, who may also be a mother, your first home might seem like a distant dream, but it could be more affordable than you think. “As long as you are willing to do your homework, you might be surprised at what is possible and how soon you can have what you want,” says Kriek. ENDS MEDIA CONTACT: Rosa-Mari Le Roux, [email protected], 060 995 6277, www.atthatpoint.co.za For more information on Sentinel Homes please visit: Website: www.sentinelhomes.co.za Facebook: Sentinel Homes  This year, almost half of the world's inhabitants will head to the polls to elect their new governments, including 8 of the world’s 10 most populous countries.
"In South Africa, we can expect our own election to put the property market into a temporary holding pattern, dragging on the subtle buyer’s market we have been experiencing" says Renier Kriek, Managing Director at Sentinel Homes. While he advises owners to wait until the end of the year to consider selling their property, Kriek cautions buyers to not get caught up in election fears and miss out on real estate bargains. The impact of sentiment All market behaviours are driven by sentiment. South Africans face uncertainty around the outcome of the election and the likelihood that, for the first time in its history, the country will be led by a coalition government at the national level. This creates negative sentiment that is also being fuelled by the heightened and increasingly populist rhetoric of competing political parties. And persistent factors, like the delay in interest rate cuts and a declining rand, only add to the doubt. "While we were all hoping for a downturn in the rate cycle at SARB's May or July meeting, I now doubt anything will happen before September. The MPC remains hawkish and seem unlikely to move interest rates down before the US Federal Reserve has lowered their policy rate," says Kriek. That's expected well after the election and these compounded concerns are pushing people to take a wait-and-see approach, including in the buying and selling of property. A first for South Africa All countries with a proportional representation electoral system eventually face a coalition government scenario. The likelihood of a national governing coalition is therefore a sign that our political system is maturing. This will be South Africa's first coalition government at a national level and the norms associated with such a structure have never been firmly established among the political class or the voting population. While national coalitions are a sign of progress and maturity, it is likely to lead to a lot of short- to medium-term noise, that is likely to have a continuing and unpredictable impact on sentiment in all markets, including the property market. The nearest we have to some agreement is the Multiparty Charter whose only purpose is to counter a national coalition between the ANC and EFF. Countries like Belgium with older proportional representation systems have developed the advanced bureaucracy necessary to almost run the country on autopilot, even without a government. South Africa, however, still needs to find its footing in any coalition pacts and develop the necessary protocols among participants intent on promoting their own interests. "This means things will probably be noisy and messy for some time after the election, as parties attempt to nail down the terms of their respective alliances," says Kriek. What to expect from property Currently, it's still a buyer's market for property and it definitely won't turn into a seller's market until after the election and a rate cut. Until then, we can expect that property price growth will remain low. Once the election outcome is known, and provided we have avoided worst-case scenarios, and the rate cut is at hand, we can expect pent-up demand for property to spill into the market and significantly increase demand. In addition, weak economic growth means sellers who can afford to wait should indeed wait until spring or summer to see if they can fetch a good price for their property relative to the market. Winter is historically not a great time for selling homes anyway. Despite the general modd brought on by politics and the interest rate cycle, the market in the Western Cape remains buoyant and there are signs of buyers returning in earnest to areas like southern Gauteng and areas eastof Pretoria. The smart money of property investors also remains in the market, signalling that opportunities exist. Along with low property price growth, this means that astute buyers can still pick up bargains while others hesitate. "If you want to buy, buy now and don't be put off by sentiment-driven hesitance that currently prevails in the market election sentiment," advises Kriek. “In the South African property property market, due to structural factors, what goes down must eventually come up.” ENDS MEDIA CONTACT: Rosa-Mari Le Roux, [email protected], 060 995 6277, www.atthatpoint.co.za For more information on Sentinel Homes please visit: Website: www.sentinelhomes.co.za Facebook: Sentinel Homes  There is a major surge in investment in buy-to-let properties across South Africa, with the Western Cape leading the pack.
"We're seeing a 15 year high in national investment applications, which rose to 11.8 percent of all applications by the last quarter of 2023," says Renier Kriek, Managing Director at Sentinel Homes, who bought his first investment property at 19 and has been investing in residential property ever since. Usually, this figure is around 5 percent. Kriek is quoting recent ooba Home Loans market data which also puts investment applications in the Western Cape at a whopping 28.2 percent of total applications. "The housing demand in the province is enormous and property investors are obviously taking note," says Kriek. Investors, not home buyers Home buyers are hesitant to buy right now due to uncertainty around the upcoming election, as well as the rising cost of living caused by inflation and high interest rates. This could mean current data may be skewed by their lower participation, making investment applications appear greater as a percentage. Even so, it also indicates that property investors remain confident, active in the market, and resilient regardless of economic pressures. Property investment may also be seen as more secure in the current uncertain political climate. Why is property investment vibrant? One reason is the ongoing trend of semigration, with South Africans flocking to areas offering better infrastructure and service delivery. This is especially true of the Western Cape where new property development lags the influx of semigrants. Many coming to the province now rent while searching for a new home or while theirs is being built. Another reason is the return of tourists to Cape Town, still one of the top holiday destinations in the world. Investors are already snapping up prime properties they can rent out as short-term leases and holiday accommodations. The increased demand for rentals and improving performance in rental properties, including lower vacancies and tenant defaults, is driving the wave of buy-to-let investment applications. Tips for investors So, if people are serious about investment buying, does Sentinel Homes have any tips for them? "Indeed, we do," says Kriek.
New and experienced investors alike can benefit from Krieks advice. ENDS MEDIA CONTACT: Idele Prinsloo, [email protected], 082 573 9219, www.atthatpoint.co.za For more information on Sentinel Homes please visit: Website: www.sentinelhomes.co.za Facebook: Sentinel Home  The local property market will see a resurgence in 2024 predicts Renier Kriek, Managing Director at Sentinel Homes.
"People have been held back from buying and selling property by various factors since before the COVID lockdown, but that is about to change for the better," he says. Factors impacting the local property market In South Africa, property buying and selling have dropped steadily since 2021. In 2023, market volume was about 5% lower than 2019. The factors driving this decline include load shedding, the national logistical backlog, a stalling economy, runaway inflation, the rising cost of living, and a 475 basis point increase in the lending rate since the COVID lockdown ended. However, people's life circumstances continue to change, suggesting pent up demand building below the surface. The number of first time buyers – a solid indicator of market demand – has also decreased significantly, again implying that unsatisfied demand exists. Outlook for 2024 Two main events signal that things are about to change. First, economists agree that, as inflation slows in South Africa, SARB will likely reduce the interest rate at its May or July National Planning Commission meeting in line with the US Fed. Second, the country will hold general elections this year, and probably be led for the first time by a coalition government at national level. While this might concern South Africans, it also promises to bring new energy to solving the nation's dilemmas. Kriek believes both these events will turn out well and will provide a release for the evident demand for property. "Then, we'll see a dramatic increase in market activity," he says. Several lesser trends are also worth watching. Smart money in the market Right now, there's a lot of smart money in the market – entities that buy properties to boost their portfolios, not their lifestyle. Interest rates on mortgage loans have decreased significantly, partly because banks are competing for a shrinking market, but also because these investors are richer, have better credit records and present a much lower risk than the average buyer. They are also paying higher deposits up to 105 percent. In the same vein, wealthy buyers from abroad are snapping up luxury properties in Cape Town above R20 million. This trend is sure to continue into 2024 as that smart money looks to acquire more assets before the market turns. Semigration Semigration remains a major trend in 2024 and smaller towns will continue to be targeted for gentrification, no longer only in the popular Western Cape but across the country. As more affluent buyers seek stock in these locations, incumbents will see their property value rocket. This may not be the only incentive for them to sell, though. Increases in rates and the cost of living may become unaffordable for them, pressuring them to move elsewhere. But where will they go? With more than 80 percent of all building plan approvals being in coastal areas currently, the answer is plain to see. Co-buying There is a marked increase in co-buying, that is, people buying a property together with someone other than their spouse. This includes friends, unmarried couples, investors and those with business intentions. About one in every four properties purchased is now co-bought. This approach overcomes the gap between property prices and income, and is a way for younger people to enter the market while spreading risk between them. Banks have also changed their policies to accommodate co-buying, with some allowing up to 12 individuals to join in the application. Buy-to-let boom The buy-to-let market is booming, especially in the Western Cape. One reason is that, due to insufficient stock and higher property prices at the coast, many semigrants rent while they shop around for an affordable property or while their new home is being built. This growing demand provides a good incentive for buy-to-let landlords to invest in new homes and apartments, despite the high construction costs. Almost 11% of all bond applications are currently investment purchases. Smaller properties Another continuing trend in 2024 will be smaller plots and smaller properties. High construction costs make it very difficult to create new stock that competes with existing stock in the market. So, both tenants and buyers will have to adapt to reduced living space unless they can afford to build their own at a premium. Relief for homeowners The number of buyers may be low but owners are also holding onto their properties for dear life, in the face of crippling interest rates. Unfortunately, foreclosure may have forced some to sell. Yet, the predicted drop in interest rates promises relief to those who managed to stay afloat. It could also mean an influx of buyers for anyone who desperately wants to unburden themselves of their property. When will the change happen? Kriek expects the dam to break in the coming winter. This is not a prime time for property sales, however, especially in the Western Cape. During this season, people tend to buy fewer properties or buy them at a reduced rate. "With lower transaction volumes during the winter months, there is likely to be a slight buyer's market that will turn to a seller's market in spring," he says. ENDS MEDIA CONTACT: Rosa-Mari Le Roux, [email protected], 060 995 6277, www.atthatpoint.co.za For more information on Sentinel Homes please visit: Website: www.sentinelhomes.co.za Facebook: Sentinel Homes  Everyone buying a home would like to know that they are getting good value for money. Buying a property that is good value for money is not easy but is achievable for those who are astute and are willing to be patient and remove as much emotion from the decision as possible.
The first important mindset shift is that buyers must not confuse value with price. “Just because you were able to negotiate a reduction in the asking price does not make it a bargain. The price likely was inflated to begin with, because there are many incentives favouring higher listing prices,” says Renier Kriek, Managing Director of Sentinel Homes. True bargains have some distinguishing characteristics to look out for. This includes:
Home seekers on the lookout for a bargain must remain alive to illegal construction. “The risk associated with illegal building work is almost always not worth the discount on the price,” says Kriek. If there are any doubts about the structural integrity of a building, call in the professionals to do an inspection. The benefit of a qualified home inspector, especially to inexperienced buyers, cannot be overstated. Since kitchens and bathrooms are the most expensive parts of any residential properties carefully consider the conditions of these two areas. More sage advice from Kriek is to avoid bargains close to open public spaces. These areas tend to devalue property if they are not well maintained by local authorities. ENDS MEDIA CONTACT: Rosa-Mari Le Roux, [email protected], 060 995 6277, www.atthatpoint.co.za For more information on Sentinel Homes please visit: Website: www.sentinelhomes.co.za Facebook: Sentinel Homes If you do not want to receive emails from us, please use the link: Click here to unsubscribe.  A path to financial security is home ownership. Since there is no rule saying your first property must be a home to live in, you have the freedom to buy the home you can afford as the best way of getting started.
Asset prices have escalated much faster than wage increases over the past 70 years and that trend is likely to continue. This simply means that homes are becoming less affordable, says Renier Kriek, MD of Sentinel Homes, a non-bank home loan provider. “If the trend of decoupling asset and wage prices is going to continue the best bet is to get into the property market sooner rather than later. Particularly when there are so many bargains to be had.” First time home buyers are progressively becoming older because of affordability. It has moved from around 30 to 32 years to around 38 to 40 years. “You must get in earlier to buck this trend. If you wait until the time you can afford your dream home you may never be able to achieve that goal.” It is now a buyer’s market. Kriek explains that South Africa is coming off from a high-inflation-high-interest-rate cycle. “Inflation has become a more manageable beast, and market watchers are starting to predict a decline in interest rates next year.” Time the market Unfortunately, very few people act until they see the first rate cut. By then the cat is out of the bag and the market will change quite rapidly. “If you want to time the market you have to buy now.” Kriek says first time buyers who can afford to acquire a real estate asset at current interest rates will likely be able to afford it through the cycle; and they are unlikely to purchase a property they can’t afford. “The ugly duckling may be a better start than the shiny house on the hill.” He also suggests that prospective buyers use a bond originator to get prequalification for a home loan. “It shows that you are a serious purchaser, which makes everyone so much more willing and able to help.” Real estate, whether it is your own home or an investment property, comes with expenses and tax consequences. However, if you do not want to live from wage-to-wage for the rest of your life then some sacrifices are called for to enter the property market. “Every goal has some sacrifices and the sacrifices for financial goals are of the living standard kind. If you want to truly benefit from asset ownership you will have to suffer some short term discomfort. That is reality.” Take the leap Owning inflation-beating assets, like residential real estate in the correct areas and markets, is generally a good idea. Kriek has 19 years of property investment experience. His advice:
ENDS MEDIA CONTACT: Rosa-Mari Le Roux, [email protected], 060 995 6277, www.atthatpoint.co.za For more information on Sentinel Homes please visit: Website: www.sentinelhomes.co.za Facebook: Sentinel Homes |
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