 Frequent short-term borrowing could be a black mark against you when applying for a home loan.
“The number of short-term loans you burn through may warn banks or other lenders that you’re having trouble managing your finances,” says Renier Kriek, Managing Director at disruptive home finance business, Sentinel Homes. That can make them reluctant to fund your dream of owning your own property. Easy debt While all debt should be managed responsibly to maintain a good credit score, for many South Africans, short-term loans are becoming an addictive way to make ends meet. Or, to fund luxuries they can’t afford but refuse to live without. It’s tantalisingly easy to get hooked as well - you don’t need to put up collateral to get one and you don’t have to explain what you’ll use the money for. Also, some like to think that if they fall behind on their repayments, they can simply submit themselves to a debt review. Introduced by the National Credit Act, a debt review is a legal process for someone who is over-indebted to settle with their creditors by paying what they can afford. A registered debt counsellor will review their finances and help them create a repayment plan. The hidden costs Unfortunately, there’s no such thing as a free lunch. Short-term loans can carry much higher interest rates than other types of debt - up to 5% per month, which is around 6 times the current prime rate. “So, the more you borrow, the worse off you become financially and the more likely you are to default,” says Kriek. That debt review “solution” you are being offered isn’t necessarily a safe bet either - because it will cut you off from any further credit provision for as long as it takes to remedy your past bad behaviour. Even if you’re not a repeat offender, firms offering debt counselling will often assure you that your debts will be forgiven, the slate is wiped clean and all will be forgiven. “In the real world, lenders could deny your home loan application simply because you needed debt review in the first place,” says Kriek. Alarm bells Short-term or unsecured loans are not an evil to be avoided entirely. They’re actually good for the economy when used responsibly. However, they’re also a red flag to home loan providers when they feature strongly in your financial history, even if you’re keeping up with repayments. Credit providers use various risk models to identify patterns in our spending behaviour - good and bad. They know what financially responsible and irresponsible spending patterns look like. “Frequent short-term loans - with or without defaulting - are a risky pattern that implies an individual does not manage debt well, and that is something a home loan provider does not want to make a long-term investment in,” says Kriek. “The ability to delay gratification is the underlying attribute that responsible users of credit have, but there is no easy way to quantify whether a particular applicant possesses that trait – the number, frequency and type of unsecured credit transactions is a useful proxy in that regard.” Good debt So, what is the right course of action, especially if you already have short-term loans? First, understand that short-term loans have their place but are seldom necessary. Stop using them and make a plan to pay off the ones you already have. Then get to work on building an emergency fund of cash that can only be touched for true emergencies, so that you will not need unsecured debt in those cases. Second, work on saving for luxuries such as holidays and large capital purchases. You will be paying monthly anyway, whether you take the credit or save, but in the saving scenario interest will be working in your favour rather than against you. Delaying the gratification of that large purchase is difficult, but no-one said adulting would be easy. Finally, if there is no other option, opt for “good” debt as far as possible. Buy your clothes, furniture, appliances, groceries and other items using store credit if you absolutely cannot do without. You don’t have to buy things you don’t need to build a good credit score. Everyday items and normal household purchases are fine. “Credit providers’ risk algorithms generally look favorably on consumers who start their credit journey with store debt because it fits the pattern of responsible spending, provided you pay your accounts on time, of course, and do not spend near or above your credit limit,” says Kriek. Long-term planning Eventually, most people end up before a home loan provider in the hope of buying a house they love. But lenders are profit makers and risk reducers, so it’s important to think like they do. Are you a good investment? Will you repay your home loan on time and in full? The lender’s modern analytical systems - often powered now by artificial intelligence - evolved to answer questions like these and exist to protect their owner from risk. “Short-term loans that literally fund your lifestyle can easily sway the algorithm against you,” says Kriek, “especially if you are funding luxuries or nice-to-haves from easy debt rather than developing the discipline of saving.” ENDS
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 Nothing is certain except death and taxes, the saying goes. Property owners must plan for both if they want their home and other assets to pass smoothly to those surviving them.
“Structuring your estate smartly, or at least having a will in place, will spare those grieving your passing further hardship, both emotional and financial,” says Renier Kriek, Managing Director at Sentinel Homes. Any decision a property holder makes in this regard should be guided by advice from a professionally qualified financial and estate advisor. However, Kriek offers a good overview. Basic factors When planning for death, property owners need to consider two main factors. The first is how to structure their estate so they don’t directly own anything when they die. This is usually only appropriate for those with large estates and minor dependents, or businesspeople who risk having their assets attached to repay creditors, but may not be the best tax planning advice for most consumers. The second concern is their marital status. Are they single, married in community of property, or married out of community of property either with or without accrual? “Each marriage model will affect the distribution of an estate differently,” says Kriek. Make a will Without a will, intestate rules apply to the deceased estate, as prescribed by the Intestate Succession Act 81 of 1987. These rules determine which surviving relatives will inherit what portion of the estate, from the surviving spouse and descendents down to distant blood relatives. The Act’s complex requirements could result in, for example, a spouse losing their family home to ensure they and each child receives an equal inheritance. So, for anyone having assets such as homes or other fixed property and especially those property owners who have dependents, it is always best to have a will professionally drawn up to make sure assets will be distributed in a manner desired by the property owner. “Again, the marriage model will affect how the will should be structured,” says Kriek. “Estate planning with a licensed and regulated professional is also likely to include investments and insurance, proper planning of which remain essential.” Leverage trusts and companies The beginning of the article mentioned not owning property at death, which is a desired outcome for some consumers due to tax, risk or other reasons. Avoiding direct property ownership while still enjoying the benefit of owning property can be accomplished through the use of a trust or company. However, the cost of these vehicles makes them best suited to more affluent people who have larger estates and minor dependents, or entrepreneurs. If property is transferred to or bought through one of these entities, the entity owns the asset. So, dying is of no consequence, if one’s dependents are the ultimate beneficial owners of the entity, such as through being beneficiaries of a trust. The property held by a trust or company rather than in a person’s own name will not be subject to estate tax or capital gains tax at death, and typically cannot be attached by the deceased’s creditors. Only income that is earned through that property is taxed at a rate prescribed for the specific type of entity in addition to capital gains tax if the entity elects to sell the property concerned. “Which structure is best suited to an individual’s needs must be determined with the help of a trusted estate planner or financial manager,” says Kriek. “Do not assume that the more complicated structure, using entities such as trusts and companies, is the “better” and therefore most appropriate one.” Address affordability Unfortunately, structuring cannot save a property that surviving family members are unable to afford, whether it is bond repayments, rates or levies, trust administration fees, corporate accounting fees, or other expenses. This could happen if a surviving spouse does not work and cannot raise the required finances to settle existing debt against the family home or other property. An estate might be able to cover its own costs, for example, where income is derived from rental properties or the entity receives cash bequests from the deceased person. Otherwise, a will, trust or company should be backed by some form of insurance that ensures funds are available after the owner’s death. “By following this rough guide and using a properly qualified and licensed financial planner, you will allow your loved ones to continue enjoying the life you worked so hard to provide them with,” 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  Competing precedents, including a recent court case involving a home buyer who got cold feet, wanted to walk away from the deal but couldn’t, have sparked discussions in South Africa’s property law circles. The judge ruled in favor of the seller, because both parties had signed a contract that became binding as soon as the buyer’s credit provider issued its “approval in principle”.
“Some people misinterpreted the ruling, or disagree with it - saying it wasn’t fair,” says Renier Kriek, MD of Sentinel Homes. Yet the judgement followed centuries of contract law precedent by focusing only on the following question: At what stage did the purchase agreement become binding, before or after the property finance had been accepted by the buyer? “Obtaining finance is a process, unlike a turning on a light switch, it’s not instant and even positive results arrive piecemeal,” says Kriek. “When you sign an offer to purchase a property and require a home loan, there’s usually a condition that your loan must be approved before a certain date. This is called “suspensive condition” – meaning that only once this condition is fulfilled, the contract will become final and binding. “Buyers and sellers need to understand the suspensive condition in their contract, especially as they generally have competing interests in terms of what stage the deal should become final,” he says. “It’s therefore important to phrase your contract without ambiguity, so it’s not open to misinterpretation.” Real-life consequences Contract law may sound academic, but it has serious, real-life consequences. Since nobody wants to lose their deposit, Kriek urges buyers to fully grasp the financing process: When a home loan provider assesses your application to buy a house, and is satisfied lending you the money, it will first issue an approval in principle (AIP). Then it conducts a valuation, before eventually issuing a prescribed document called pre-agreement statement and quotation. According to the NCA, the buyer has five days to accept the pre-agreement statement and quotation, which then becomes a final offer of finance. “From the seller’s perspective, it would be best if the agreement of sale would likely contain a clause stating that the contract becomes binding as soon as the home loan provider issues the AIP,” says Kriek. “From the buyer’s perspective, however, this clause poses a risk: it means you’re bound to the sales agreement, the sale is final, and your deposit could be on the line, even before you have agreed to the interest rate and other finance conditions suggested by the home loan provider.” Ideally, he advises buyers to ensure the sale is only binding once: a) the bank has issued the pre-agreement statement and quotation, and b) you have accepted it. “This means you can only lose your deposit or be forced to buy the property once you have agreed to the terms of the credit proposed to you.” Check the nitty-gritty Also watch out for home loan approvals that require the submission of approved building plans. As a rule, your offer to purchase should require the seller to do so. But if this clause is missing, the seller won’t be obliged to provide the building plans, even if your home loan provider requires these. This makes you as the buyer responsible for obtaining the plans. It’s not only time-consuming but if plans can’t be approved, due to unauthorised building works, your deposit may once again be at risk. This also applies to any other conditions your home loan provider may have. You have to ensure that these conditions are also in the sale agreement, so that the two documents tie into each other. For these reasons, Kriek urges buyers to get legal advice before signing their offer to purchase. Don’t rely only on the property practitioner or others linked to the seller No-one should take a high cost and high liability decision like buying a home without expert legal and other professional advice, such as from a registered property practitioner and bond originator. Ultimately, understanding the nitty-gritty of your contract should help you avoid financial losses and enjoy a smoother property transfer. 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  It's not easy to get a mortgage on your dream home if you're not employed full time and earning a fixed salary. Freelancers, those working on commission or sourcing their income from gigs, and many other independent earners, often find themselves facing a brick wall when applying for a home loan from banks.
However, more people than ever are becoming self-employed in these fields and are seeking easier alternatives to a traditional mortgage bond. This is according to Renier Kriek, Managing Director at Sentinel Homes, which specialises in financing home ownership through instalment sale agreements. How does it work? "Instalment sale agreements are steadily becoming popular not just among those that do not qualify for a bond but also many who do not fit the salaried mould for which the mortgage model was specifically developed," says Kriek. An instalment sale makes acquiring a home similar to buying a vehicle on hire purchase. In Sentinel's case, the company finances the purchase and the buyer repays the value of the property in monthly instalments. Although the company holds the title deed, the buyer enjoys all the rights and responsibilities of ownership during the period of the contract. Once the purchase price is repaid in full, total ownership is transferred to the buyer. "On the surface, there is little difference between buying with a bond or via an instalment sale," says Kriek. “The only practical difference is the procedure followed when the buyers do not pay their instalment, but even in that case, an instalment sale is to their advantage.” However, an instalment sale agreement offers several advantages to this class of homeowner. Improved affordability Because a freelancer or a self-employed person’s income may vary from month to month, the bank will only consider a portion of their earnings. So, even if they qualify for a home loan, they will likely have to settle for a cheaper property or fund any shortfall on the purchase price themselves. Through an instalment sale, up to 100% of their income is assessed. “This gives the purchaser more freedom to choose a property they really want,” says Kriek. Improved credit score An instalment sale allows a buyer to acquire a valuable asset sooner and improve their credit score in the process. As the property’s value increases and their financial position grows over time, they may become a more attractive borrower. And they do not risk being caught in a rent trap while the values of homes continue to increase. "Many of our clients have been granted bonds on the basis of their instalment payment history and were able to settle our instalment agreement early from bond refinance," says Kriek. “You can never get on the property ladder soon enough.” Lower default risk When a borrower defaults on their mortgage, they face losing their property through a sheriff’s auction, having adverse judgements against them, and being blacklisted for 5 years or more. This impedes their ability to acquire another property and obtain any credit, and may even limit employment opportunities. However, with an instalment sale agreement, they have more options, including negotiating their position and, ultimately, selling the property to pay off their debt. "Even then, they retain a clean record and we have assisted clients that eventually recovered from such a position to buy another property," says Kriek. Protected by law As with a mortgage, the contract is governed by the very comprehensive National Credit Act. Another law, the Alienation of Land Act, also applies, ensuring the rights of the parties to the agreement are fully protected. Instalment sales are also registered against the title deed of the property. A growing market As more people start to freelance or work in other independent fields with irregular income, owning a home through an instalment sale agreement promises a logical alternative to mortgage bonds. "It is apparent that an instalment sale agreement offers better advantages, more protection and greater flexibility to those who dream of owning a home without sacrificing their financial independence," says Kriek. “The offering is available via mainstream intermediaries, so be sure to ask your bond originator or estate agent about this currently lesser-known financing option.” 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  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  Homes farther out, and more reasonably priced. This is increasingly what South African property buyers are looking for. “There are multiple reasons contributing to this trend,” explains Renier Kriek, CEO of home financing company Sentinel Homes.
"Rising interest rates and the resulting decline in transaction volume are significant factors. The increased proportion of ‘motivated sellers,’ selling because they are in a rising costs squeeze, are now likely to stabilise price growth until the rate hiking cycle eases off or starts to reverse.” According to Kriek, the consequences of the Covid-19 pandemic are also still very visible. “Office vacancy rates have increased, resulting in consumers no longer being as motivated by office proximity when selecting homes. This means they can search for value in outlying areas. Many even semigrate to other parts of the country. We also expect to see a rising level of commercial to residential conversions in urban areas. Semigration and its cousin convenience Kriek names the current hottest markets and sites for real estate investment as the coastal regions from the West Coast to Cape Town and Mossel Bay. “The Mother City remains very popular despite high prices and strained infrastructure,” he says. “This thanks to their loadshedding buffer due to the City’s generation projects and other electricity initiatives, as well as the city’s lifestyle benefits.” He claims that the Garden Route and George Airport’s close proximity make this popular tourist destination just as convenient as Cape Town. “But it must be highlighted that the affordability benefit there is quickly waning because this area has become a focus for immigrants from both inside and outside the Western Cape.” Finally, the West Coast (north of Cape Town) is also seeing a rise in the real estate market, thanks to its charming tiny fishing villages and rural communities like Langebaan, St Helena Bay and Paternoster. “Consumers who work from home are discovering the real value in pricing that was previously only influenced by variables connected to the regional fishing and farming industry. Due to external demand for property, it is now unbound. On the other hand, gentrification problems may result from this and increasingly poor access to housing for families in the bottom half of the income spectrum is a real threat.” Kriek says those still buying property in the economic hub of Gauteng, are shying away from freehold properties, such as single houses on larger plots in unguarded neighborhoods. “They prefer estates and sectional schemes. This is likely a search for safety and services,” he elaborates. Those entering the Gauteng property market will likely find the best long-term investment to be inside a security estate or secured sectional title scheme. Owners of freehold properties in more traditional suburbs may consider cashing out and moving with the trend in the interest of their longer-term financial well-being.” Challenges for First Time Buyers Kriek says that first-time buyers - who make up a very large proportion of purchasers - are moving into the property market much later. This trend is continuing to intensify. The lack of affordable housing supply and inefficient housing finance market in the affordable or gap housing market, specifically properties priced under R750 000, contributes significantly to this trend. “The National government, through the Department of Human Settlements, unveiled significant updates to their Finance Linked Individual Subsidy Programme (FLISP), now called First Home Finance, with the aim to improve access to affordable and gap housing. The expanded policy is still in the nascent stage of implementation, however, and its effects are likely not to be evident in market trends until next year.” Kriek adds that Sentinel Homes offers the first open-market alternative to mortgages. By expanding access to housing finance, it is serving those 5%-10% of housing consumers who lack housing finance, despite being creditworthy and having the necessary disposable income. “Now is the time in the property market cycle to escape the rent trap and start meaningful steps toward long-term financial health. Homeownership is a significant part of that equation,” says Kriek. “You are more likely to buy something you can really afford if you buy it in the current conditions. There is the added upside that prices for properties priced around the average can only really go one way from here – and that is 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  While some people have emigrated to other countries to escape South Africa's apparent socio-economic decline, those who opt to stay may simply ‘semigrate’ to better provinces or areas. Gauteng, with Johannesburg and Pretoria, remains the country’s economic powerhouse. Despite being the smallest province, it hosts almost 1 in 4 South Africans. It also contributes more than a third of GDP (Stats SA 2017) and more than 40% of consumer credit is granted within its borders (National Credit Regulator Q4 2022). However, there has long been a trend of South Africans seeking out perceived lifestyle advantages by moving to other provinces. “KZN and, most notably, the Western Cape are favoured semigration destinations,” says national property trends expert and co-founder of Sentinel Homes, Renier Kriek. Increased semigration Before Covid-19, semigration often took one of two forms. Firstly, whole businesses or business units would relocate to the Western Cape or KZN with their employees in tow. This practice continues as businesses seek better service delivery, such as the City of Cape Town’s ability to shield its residents and businesses from some of the effects of load shedding. The second form was people who quit their jobs and accepted a pay cut to enjoy the so-called ‘lifestyle dividend’ of living closer to the shore or in rural areas, or decided to move their families and commute to Gauteng by plane, to arrive at the same result. After Covid-19, which normalised remote working, a third variant of the semigration trend arose. Remote workers can now work from almost anywhere. “This new development has led to increased semigration to outlying or previously less favoured areas, such as small coastal towns, where whole businesses and single job-seekers would rarely have ventured,” says Kriek. These include West Coast towns such as Langebaan, St Helena Bay and Paternoster. The sleepy fishing village of St Helena Bay, for example, has 23 real estate agencies at last count, each with a number of agents selling and renting out property. The market for real estate there is booming. Factors driving people to such destinations include the desire to escape higher levels of load shedding and crime, improved service delivery, a more relaxed social environment, and promising economic growth, job creation and infrastructure development. In-demand areas For lower income consumers, the Western Cape is attractive due to its lower unemployment rate (21.6% vs 32.9% nationally). The province is also reducing unemployment faster than other parts of the country. In addition, it has an advantage in infrastructure, such as schools and hospitals, which are perceived to be superior. Between February 2022 and February 2023, food prices in the Western Cape grew by 12.4%, which is much lower than Gauteng (14.2%). “The semigration trend in the Western Cape is fairly broad-based whereas the northern coast is attracting more affluent earners from Gauteng,” says Kriek. Similarly, unemployment in KZN (30.9%) and the Northern Cape (26.6%) is less than the national average. Impact of semigration While some areas are feeling the impact of semigration, others are witnessing economic growth as a result of this influx of new residents. On the one hand, previously popular locations like the northern suburbs of Cape Town have become much busier due to semigration, with the roadways surrounding the city showing signs of being overburdened. However, other favourite semigration destinations, like Mossel Bay, are enjoying beneficial growth and urbanisation. In Mossel Bay's case, this is due to its close proximity to George Airport, which makes commuting between Johannesburg and Cape Town's suburbs easy and convenient. It is also highly probable that the flood of semigrants to these areas could drive housing prices up. This could be either to the benefit of locals selling their property or to their detriment if they wish to buy. In addition, existing homeowners could face higher-than-normal rates increases. Prices in the Cape Town metro area have already far outpaced growth in the other urban centres. This factor, coupled with the inclination to seek greater value in times of rising interest rates, is driving buyers to hunt for property in outlying areas that could yield bigger bang for their buck. “This trend is likely to continue and may intensify as national service delivery and infrastructure maintenance seem to lag behind the Western Cape,” says Kriek. Availability of property The supply of property may be hampered by over regulation of new constructions while reducing the availability of affordable housing to lower income earners. As demand outstrips supply, areas outside established urban and suburban districts will surely gain more attention from home seekers, and experience the same economic benefits and growth. Kriek says that prospective semigrants should therefore take the plunge as soon as possible. "There are other trends to consider apart from semigration when deciding where to live so it's important to plan carefully; in addition, interest rates are already peaking so, if you can afford it, you will likely be better off in the future as long as you act now," 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  It's not easy to get a mortgage on your dream home if you're not employed full time and earning a fixed salary. Freelancers, those working on commission or sourcing their income from gigs, and many other independent earners, often find themselves facing a brick wall when applying for a home loan from banks.
However, more people than ever are becoming self-employed in these fields and are seeking easier alternatives to a traditional mortgage bond. This is according to Renier Kriek, Managing Director at Sentinel Homes, which specialises in financing home ownership through instalment sale agreements. How does it work? "Instalment sale agreements are steadily becoming popular not just among those that do not qualify for a bond but also many who do not fit the salaried mould for which the mortgage model was specifically developed," says Kriek. An instalment sale makes acquiring a home similar to buying a vehicle on hire purchase. In Sentinel's case, the company finances the purchase and the buyer repays the value of the property in monthly instalments. Although the company holds the title deed, the buyer enjoys all the rights and responsibilities of ownership during the period of the contract. Once the purchase price is repaid in full, total ownership is transferred to the buyer. "On the surface, there is little difference between buying with a bond or via an instalment sale," says Kriek. “The only practical difference is the procedure followed when the buyers do not pay their instalment, but even in that case, an instalment sale is to their advantage.” However, an instalment sale agreement offers several advantages to this class of homeowner. Improved affordability Because a freelancer or a self-employed person’s income may vary from month to month, the bank will only consider a portion of their earnings. So, even if they qualify for a home loan, they will likely have to settle for a cheaper property or fund any shortfall on the purchase price themselves. Through an instalment sale, up to 100% of their income is assessed. “This gives the purchaser more freedom to choose a property they really want,” says Kriek. Improved credit score An instalment sale allows a buyer to acquire a valuable asset sooner and improve their credit score in the process. As the property’s value increases and their financial position grows over time, they may become a more attractive borrower. And they do not risk being caught in a rent trap while the values of homes continue to increase. "Many of our clients have been granted bonds on the basis of their instalment payment history and were able to settle our instalment agreement early from bond refinance," says Kriek. Lower default risk When a borrower defaults on their mortgage, they face losing their property through a sheriff’s auction, having adverse judgements against them, and being blacklisted for 5 years or more. This impedes their ability to acquire another property and obtain any credit, and may even limit employment opportunities. However, with an instalment sale agreement, they have more options, including negotiating their position and, ultimately, selling the property to pay off their debt. "Even then, they retain a clean record and we have assisted clients that eventually recovered from such a position to buy another property," says Kriek. Protected by law As with a mortgage, the contract is governed by the very comprehensive National Credit Act. Another law, the Alienation of Land Act, also applies, ensuring the rights of the parties to the agreement are fully protected. Instalment sales are also registered against the title deed of the property. A growing market As more people start to freelance or work in other independent fields with irregular income, owning a home through an instalment sale agreement promises a logical alternative to mortgage bonds. "It is apparent that an instalment sale agreement offers better advantages, more protection and greater flexibility to those who dream of owning a home without sacrificing their financial independence," 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 Home |
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