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Buyers Urged to Move Closer to Work as Fuel Costs Rise
With South Africa’s energy prices increasing faster than the consumer price index, home buyers should consider moving as to close to their workplaces as possible. That’s the message from Professor Matthew Lester of the Rhodes School of Business, after the release of South Africa’s 2013 budget.
A guest speaker at Greyvensteins Attorneys recent Property Forum inPort Elizabeth, Lester said that South Africa was in an energy crisis, evidenced by the fact that it was paying international prices for electricity and petrol. It was therefore critical for consumers to start relooking at their energy usage and what it was costing them to travel, he said, adding that transport costs needed to be moved to the top of home buyers’ priority lists. With the very high cost of fuel, and carbon tax coming strongly into South Africa, the cost of which would be passed on to the consumer, people needed to travel less, he urged.
While ‘location, location, location’ was still the watchword of real estate buying, he continued, this real estate truism now had to include proximity to work. By living close to work, he said, consumers could make a significant impact on their “prohibitively expensive living costs” to ensure that they would be able to afford to maintain their homes in the long run. Properties were often affordable to buy but too expensive to keep, he added, hence his encouragement of people rechanneling as much of the money they were currently spending on commuting as possible into paying off their bonds and the general maintenance of their homes.
Lester also urged people not to rely on the government to put a roof over their heads, saying it was already supporting the majority of the country’s 52 million citizens in terms of social grants. Pointing out that people today had a life expectancy of 100 years, he said many would be retired for as long as they had worked.
“The time of the six parent family has arrived - can we afford to all live in different homes?” he asked. To this end, he suggested that there had never been a better time than now to make “structural” changes. This was particularly pertinent to families able to live comfortably on the same property – what he referred to as ‘bunking up’. “This is a huge opportunity to save a fortune,” he said. “Paying your bond is one thing, maintenance and upkeep quite another, so if you’re going to move, make the move now and don’t follow the market.”
While a relatively alien concept for South Africans who were used to long and congested commutes, and who placed a high value on location and late model cars, the concept of living close to work was gaining momentum in other countries, says Richard Gray, CEO of Harcourts Real Estate.
“The issue of living close to work has been thrust into the spotlight by, among others, the Chicago-based Center for Neighborhood Technology (CNT) and Johns Hopkins University in Maryland, USA,” he says. “The CNT uses a Housing and Transportation Affordability Index to measure the true affordability of housing based on where it is located. The ideal according to this index is that housing and transport costs, the two largest expenses in most homes in the US, should account for no more than 45% of their budget, and this is likely to apply to South Africa, too.”
The “Live Near Your Work” initiative of the Johns Hopkins University further underpins the shift in home buyers’ minds, he maintains. “The programme has been designed to help employees reduce their travelling costs and times while simultaneously building equity in their homes. Michelle Carlstrom, senior director of the University’s Office of Work, Life and Engagement, who oversees the programme, relocated and in so doing, reduced her daily commute from almost 90 minutes to just four minutes. That’s not just a huge saving in petrol and wear and tear but also in terms of time: 85 minutes a day multiplied by 22 working days a month equals 31 hours of driving time saved in just one month! Multiply this by 11 months and she is saving 341 hours of driving time a year. Imagine what you could do with that time and the money saved!”
Gray says home buyers need to buy what they can comfortably afford, not only in terms of initial purchase price but also in home and vehicle upkeep. “When working out a budget for a new home, it makes financial sense to factor in travel expenses such as petrol, vehicle payments, maintenance and insurance to ensure that you’re able to cope with inevitable fuel and electricity increases.”
Something else for house hunters to consider, he adds, is quality of life. “Living close to your workplace will allow for a better balance between work and home. You’ll have more time to spend with your family or friends and more time to pursue hobbies or upgrade your skills.”
T ip 6 December 2012
It’s that time of the year again when there seems to be more money going out than coming in. For many families, meeting day-to-day costs is a struggle in itself, without the added pressure of that end-of-the-year spending that is often expected.
So how can you pull in your spending belt-buckle when the end-of-year trend is to spend big? Here are some ideas to get you thinking:
To avoid debt:
• If you have multiple credit cards, then choose the card with the highest interest rate and pay that off first. Then work your way through the others until just one remains.
• Cut down on impulse buying by planning your shopping and spending only what you need to.
• Set a budget for gifts and stick to it — some people even save a little money each week throughout the year and use that as their festive season spending money.
• Use a debit card rather than a credit card so you are spending your own money.
• Use cash where possible, particularly if you have trouble controlling credit card spending.
To save money:
• Take your own lunch to work rather than buying it.
• Put all your loose change into a moneybox on a daily basis and use this as ‘money for extras’ (i.e. movies, going out).
• Set yourself a budget for ‘personal expenses’ (i.e. coffee, movies, books, CDs, etc.) each week and stick to it.
• When entertaining, ask everyone to bring food to share.
• Spend a day in the kitchen baking festive season goodies to give as gifts.
• Buy cards and wrapping paper from discount stores.
News Flash - SALR ( Legalbrief / LSSA Weekly) - 7 December 2012
Decision - a boost for consumer rights
Consumer rights have received a major boost with a recent SCA decision, the National Credit Regulator (NCR) said this week.
The SCA ruled in favour of the NCR against Standard Bank, for overcharging on administration fees on home loans granted under the Usury Act.
It stipulated that money lenders could not charge a fee of more than R5, excluding VAT, for administration, says a report on the Fin24.com site.
The Usury Act has since been repealed by the National Credit Act (NCA).
However, the NCA includes transitional provisions relating to pre-existing agreements, and some of its provisions apply to pre-existing credit agreements which would have been subject to the NCA had it been in effect when the agreements were concluded.
The SCA held that Standard Bank was not entitled to charge an administration fee greater than that allowed by the Usury Act on home loans which existed at the time the NCA came into operation, until the fee is amended under the powers conferred by section 105(1) of the NCA.
For more go to: http://www.fin24.com/Economy/Decision-a-boost-for-consumer-rights-20121204
News Update: Nedbank - 8 February 2013
With effect from the 1st of February (today), Nedbank will no longer consider non-Nedbank applicants for home loan finance - previously the maximum LTV was limited to 60%.
The good news is that a Nedbank client is classified differently than before and this creates more possibilities for them going forward.
A Nedbank client refers to a person who is an account holder of any Nedbank account, for instance credit card, personal loan, existing Home loan, investment etc. (Previously the definition of a Nedbank client was a person who was a Nedbank transactional account holder who had his/her salary deposited into this account).
For submission of joint/multiple applicant submissions, at least one of the applicants it is required to be classified as a Nedbank client, irrespective of where the main applicant banks, who the highest income earner may be or who has the largest disposable income.
*The ruling above is already in place and you may submit your applications based on the information included here.*
We firmly believe that this is more good news than bad news and will continue to source the best deal for you from all the applicable banks.
News Flash 4 December 2012
The world economy is in its best shape in 18 months as China’s prospects improve and the US looks likely to avoid the so-called fiscal cliff, according to the latest Bloomberg Global Poll of investors.
Two-thirds of the 862 respondents described the global economy as either stable or improving. That’s up from just over half who held that view in September and is the most since May 2011. The US came out on top for the eighth consecutive quarter when investors were asked which markets would offer the best opportunities over the next year. China ranked second, reversing a decline to fourth in the September poll of investors, analysts and traders who are Bloomberg subscribers. The EU, beset by a debt crisis, was seen offering the worst returns.
“The global economy is improving, recovering and healing, thanks to the US and emerging markets,” said Andrea Guzzi, a vice-president of IST Investmentstiftung fuer Personalvorsorge, which manages money for Swiss pension funds. “More people are becoming wealthy, less and less are poor.”
Stocks were seen as the asset of choice, with more than one in three of those surveyed on Tuesday forecasting equities would have the best returns in the coming year. Property came in second: just less than one in five investors singled it out favourably, the best showing since the quarterly poll began in July 2009. Bonds were seen as offering the worst returns.
The US Federal Reserve is expected to provide continued support to the bond market after its Operation Twist programme ends next month, according to the poll. About three in four said the US central bank would begin outright purchases of treasury securities after its plan for swapping short-dated securities for longer-dated ones expired.
A relative majority – two in five – said the Fed would continue buying mortgage-backed securities into 2014, in a third round of quantitative easing by the central bank, dubbed QE3.
“The Fed is being very clear about monetary policy,” said Gala Prada, a portfolio and asset manager for Spanish insurance company Fiatc Mutua de Seguros y Reaseguros. “If the economy doesn’t improve, there will be a QE4 or more asset purchases.”
The growing optimism among investors about the world economy was not reflected in their views of the prospects for the financial services industry. About seven in 10 said they expected large banks to reduce payrolls further in the next year after cutting at least 188 000 jobs over the past two years. A majority attributed the reductions to regulatory changes.
Banking authorities have tightened rules and raised capital standards for banks after the worst financial crisis since the Great Depression forced governments to spend billions of dollars to rescue ailing financial institutions.
“Many countries have oversized banking sectors, which need to go back to more sustainable sizes,” Guzzi said.
The optimism on the world economy is based in part on an expectation that the US will avert $607 billion (R5.3 trillion) in automatic spending cuts and tax increases scheduled for January 1. Three out of four respondents anticipate that President Barack Obama and congressional leaders will reach a short-term agreement to avoid the fiscal cliff.
The Organisation for Economic Co-operation and Development warned this week that the world economy would tip into recession if the US failed to act.
Close to half of investors said they planned to increase their exposure to equities over the next six months, up from less than two in five in September.
Respondents are most bullish about US equities. A majority forecast that the Standard & Poor’s 500 Index would rise during that time frame. S&P 500 futures rose this week amid optimism that President Barack Obama will reach an agreement with Congress over a new budget. The stock gauge has increased 12 percent this year.
“US companies have better profit potential, balance sheets and access to capital,” said Christian Thwaites, the president and chief executive of New York-based Sentinel Investment, which manages more than $27bn.
US property prices were also heading up, investors said. More than three in five forecast that housing values would be higher six months from now. A minority responded that way in the last poll in September.
Home prices rose in the 12 months to September by the most since July 2010, advancing by 3 percent, according to the S&P/Case-Shiller index of property values in 20 cities.
The housing market has been supported by the Fed, which has said it expected to hold overnight interbank interest rates near zero until at least the middle of 2015.
Forty-five percent of investors said the US central bank would enhance understanding of its policies and help the economy if it tied its pledge to keep rates low to specific thresholds for unemployment and inflation.
One in four said such a move would be confusing if such a goal-oriented commitment replaced the Fed’s current calendar-specific rate promise.
The US central bank itself is split over the issue. Fed vice-chairman Janet Yellen and Chicago Fed president Charles Evans have supported a switch, while the Philadelphia Fed’s Charles Plosser and the Dallas Fed’s Richard Fisher have voiced doubts.
Commodities lost some favour in the latest survey. Only 12 percent said it would be the best-performing asset class over the next year, down from 18 percent in September.
Investors remain downbeat on bonds. Forty-eight percent intend to reduce their holdings of US treasury bonds over the next six months, the most since the poll began asking that question in May 2011. By a slim margin – 50 percent to 45 percent – respondents viewed treasuries as a safer investment than AAA-rated US corporate bonds, such as those of Microsoft and Exxon Mobil.
More than two in five investors expect EU markets to offer the worst opportunities over the next year. That was the most negative reading in the poll, followed by Japan, with 23 percent, and the Middle East, with 17 percent, up from 7 percent in September.
Forty percent of respondents said they were less likely to put money into Egypt since President Mohamed Mursi took over in July – 10 times the amount who said they were more likely to invest.
Protesters and police clashed in Cairo on Wednesday as Egypt’s opposition resolved to stand firm against Mursi and the Muslim Brotherhood in a showdown over the president’s self-decreed powers.
Half of those surveyed said they did not expect a military strike against Iran’s nuclear programme next year.
Israeli Prime Minister Benjamin Netanyahu has repeatedly warned that time was running out to prevent an Iranian nuclear bomb, which he expects to be aimed at Israel.
Iranian President Mahmoud Ahmadinejad, who regularly denounces Israel as an illegitimate regime that should “disappear”, says his country’s nuclear programme is for peaceful purposes.
The poll of Bloomberg subscribers was conducted by market research firm Selzer, based in Des Moines, Iowa. The survey has a margin of error of plus or minus 3.3 percentage points. – Bloomberg
NewsFlash
News to Use
Preparation notes for buying property
Today’s real estate market offers many opportunities for those property buyers who may have previously not been able to meet the bank’s criteria, but are now able to access finance.
The pricing correction along with the low interest rates has made this the ideal time for first-time buyers to invest in property. However, says Grant Gavin, Broker/Owner of RE/MAX Panache, before buyers take the initial step towards homeownership, they should make the necessary preparations to ensure that the process is as smooth and hassle-free as possible.
1. What can you afford?
He notes that the first step a potential buyer should take is establishing what bond they can afford and assessing affordability can be done in several ways. “The buyer can either consult with a bond consultant, a real estate professional, or even an affordability calculator on one of the many bank websites."
He says once buyers know what bond they can afford, they can add on any cash deposits or other money that may be available them, which will give them a good understanding of what price range of homes they can look at purchasing. "Rather go through this process first, than find the home of your dreams and be let down because you didn’t establish up front what bond you could qualify for."
2. Budget for extra costs
Gavin says that buyers must remember to have money saved up for the other costs involved in the sales process.
Buyers are responsible for the transfer duty to SARS, as well as attorney fees for deeds office transfer and bond registration costs. It is important that they are prepared for this before entering into a sales agreement.
3. Have your affairs in order
Another element that buyers should have in order beforehand is their personal paperwork.
Gavin explains that under normal circumstances a buyer will receive a period of 21 working days to obtain the necessary home loan for a property, and the first week is often delayed because buyers don’t have their affairs in order.
“To avoid delays that could be averted, buyers must make sure that they have the required supporting documentation before they apply for their finance." He says a buyer will need to have three months' bank statements, as well as well as payslips from their employers - and in the instance where the buyer is self-employed they will require three years of financial statements that will need to be submitted with the application.
4. Choose a good location
Offering advice to buyers on choosing the right property, Gavin says that position is always important. “The nicest looking home in a bad location will always seem attractive because the price will reflect the position."
He says buyers should rather go for the worst home in the best area, and in time, as their income grows and they are able to upgrade the home, their investment in the property will be justified when selling in the future.
Gavin cautions buyers that when purchasing property in the older suburbs it’s always worth getting somebody to inspect the roof. He notes that this is an aspect that even the seller does not usually check and there may be problems that they are unaware of.
5. Check for defects
If defects are detected, often they are expensive to repair. Otherwise always be aware of damp problems – as any indication of damp might mean that a greater problem lies elsewhere.
“Remember that while it is the seller’s responsibility to point out any defects of which he is aware, the buyer still has a responsibility to inspect the property to make sure everything is in order before signing the contract,” says Gavin.
NewsFlash
Avoid unpleasant post-sale rows -
Don't show what you don't want to sell
There's nothing more disappointing than walking into your new home only to find that many of the items you thought were included in the sale - like carpets and light fittings, the gas braai and the satellite dish - have been removed.
"But this can happen all too easily without a well written sale agreement," says Hano Jacobs, chief executive of the Realty 1 International Property Group. "In fact we recently came across an instance where a seller tried to remove the wooden cottage-pane windoors and doors before the buyer moved in, and claimed that he was entitled to take them because they were not part of the original structure of the house but a later addition.
"Of course this is an extreme example, but the issue of what is a fixture and what is not has always been a thorny one, and carries the potential for serious disputes between buyers and sellers that can easily cause a sale to be cancelled or at the least can really sour the buyer's enthusiasm about his new property."
In general, he says, prospective buyers viewing homes will assume that anything that appears permanently fixed in place is included in the sale, including mirrors, ceiling fans and air-conditioning.
Sellers, on the other hand, may genuinely believe they have a right to remove such non-structural items as well as "loose" items such as water features, pot plants, curtains, bar stools, pool cleaners, TV aerials and even swimming pool and borehole pumps.
However, says Jacobs, it is obviously unfair to put a property on show with all the trimmings only to remove them or to replace quality items with cheap alternatives. Also, this could have implications in terms of the new Consumer Protection Act, which entitles buyers to withdraw from any transaction they believe has been based on false advertising or misrepresentation.
"Consequently, our advice to sellers is to go through their homes before putting them on show. In addition, we advise buyers who are viewing homes for sale to ask whether specific items they really like are included in the sale or not - and to ensure that these are individually written into sale agreements. This way, both parties are far more likely to end up with a deal they feel is transparent and satisfactory."