Buyers snap up distressed homes

Gauteng, the country’s most desired province has the most active distressed residential property market, according to RE/MAX of Southern Africa.

The agency says of the 600 distressed properties listed to date this year, 70 percent are in Gauteng, 20 percent in KwaZulu-Natal and 10 percent in the Western Cape.

Distressed properties are expected to continue flooding the South African residential market for the next five years at least, says Peter Gilmour.

He explains that a lot of this is caused by interest rate hike on the horizon as well as the consumer’s debt-to-disposable-income ratios and the homeowner’s ability to meet their monthly bond repayments.

“Of the distressed properties listed in Gauteng, close on 40 percent have been successfully sold.”

He explains that these distressed properties spent an average of 48 days on the market and are priced between R250 000 and R2 million.

In Pretoria, two distressed properties sold this year spent a month on the market.

Grobler says distressed properties in this area range between R500 000 and R1.5 million and not all of them are in the bank’s distressed program.

“There are many homeowners who are desperate to sell their properties due to financial constraints, but are not yet on the official bank’s distressed program.”

These properties offer buyers a good investment as property remains a valuable asset class to invest into.

“They are qamna prices and we do not see distressed properties as offering anything other for a buyer in comparison with a non-distressed property,” she says.

In some parts of Gauteng, distressed properties that have been sold were sold for less than market value.

Jannie Storm,  operating in the Vaal Triangle including Vanderbijlpark, Sasolburg and Vereeniging says they have sold 11 distressed properties for less than the market value.

For the most part, says RE/MAX, distressed properties sell very close to their actual market value.

Currently, Storm has 28 distressed properties in Sasolburg and Vanderbijlpark priced between R300 000 and R600 000. They take between 30 and 70 days to sell on average.

In some parts of Gauteng, distressed property sales have created an immense demand for property in areas such as Clayville and Tembisa on the Midrand periphery.

This is largely thanks to the banks’ more lenient approach towards buyers of these distressed homes, says Julie Davison-White, principal of the Aida Midrand office.

“Banks have been granting bonds of up to 100 percent to buyers with good credit records when they buy property in these areas as well as some parts of Midrand,” says Davison-White.

However, she says this is not the norm as many buyers still have to put down deposits of at least 5 or 10 percent. Many buyers in Clayville and Tembisa have been purchasing property through the assisted sales programs offered by the banks to financially distressed homeowners.

Davison-White says through these programs, buyers are often able to access 100 percent bonds and 50 percent reduction in transfer costs enabling them to get a foothold in the market much more easily.

For distressed homeowners, she says the program assists them to sell their properties at reasonable prices instead of having them repossessed and then have their credit records tarnished as a result of repossession.

Distressed properties in this area sell quite quickly at prices ranging from R350 000 to R550 000 for free standing homes in Tembisa and from R550 000 to R700 000 for freehold homes in Clayville.

Demand has increased for lower-priced properties in popular areas such as Vorna Valley with price averages of R550 000, in Halfway Gardens, townhouses are priced at between R650 000 and R900 000 and Noordwyk, houses are priced below R1million and these are said to be selling like hotcakes.

As for freehold homes in higher price brackets, Halfway Gardens is currently one of the most popular areas for buyers targeting suburban homes priced between R1.1million  and R2.2 million  and clusters costing between R1.4 million and R2.5 million she says. – Denise Mhlanga

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There’s never been a better time to buy property!

This may take you by surprise – especially given how often you’ll hear differently in a week – but I couldn’t be more determined. Here’s why…

*** Firstly, property prices are incredibly low right now. According to Absa’s House Price Index, in real terms, “prices have dropped to levels last seen in early 2006”.

*** Secondly, thanks to the recent spout of interest rate cuts, prime is now only at 10%. That’s the lowest it’s been since October 2007. On a R1 million bond, you’re saving a whopping R3,216.92 each month compared to eight months ago when prime was at 15.5%.

Despite this, it’s become harder and more expensive to get a bank to approve your bond application. Back when the property market was booming, banks would happily give you a 100% home loan, regardless of the property value.

These days, you can count yourself lucky if the bank only asks for a 10% deposit. Most of them now demand anything between 10% and 30%. Even worse, they’re only willing to give you a maximum loan of 90% of the value of the house. This makes things tough for the prospective buyer and it’s why I’m going to share my top five tips to getting the best home loan out there.

Tip #1: Start planning 6 months in advance
If you’re thinking about buying a new house, do the work upfront. Approach your Mortgage Plus. Find out how much they’re willing to lend you and ask them to pre-approve your bond.

According to home loan financier, Mortgage Plus, “getting yourself pre-qualified before putting in an Offer to Purchase should be the first step you take. The National Credit Act stipulates that monthly deductions, e.g. income tax, monthly living expenses and debt need to be taken into account.” Just remember, pre-approval is only valid for 90 days. So be ready to act quickly.

Tip #2: Keep an eye on your credit score
I can’t stress enough how important your credit rating is. It shows that you take your debt seriously. And it affects the bond rates your bank is likely to give you. According to experts, the best rates tend to go to those with a credit score of 720 or higher; who have been with the same employer for at least two years; and have money for a deposit. So if you’re thinking of buying a house, request a free credit rating report at Itc. If your credit rating is less than ideal, work on raising it before you apply for a loan.

Tip#3: Shop around
According to www.propertymax.co.za , a “30 year loan is your best choice if you’re looking for a long-term stable loan. It’s usually the safest home loan you can get.” By stretching the repayment term to a 30 year bond you can bring down your monthly bond repayments. A longer home loan repayment term will improve affordability and free up your monthly cash flow. But it’s important to know that the longer the repayment term, the more interest you’ll pay. Remember this when you’re shopping around.

You’re likely to get a better rate if you bank with the loan provider. For example, a Standard Bank customer will get a 95% loan on a house worth R1 million. But a non-Standard Bank customer may only get a 75% loan. This isn’t guaranteed though… so shop around to make sure your bank’s giving you the very best rate.

Tip #4: Limit your credit applications
Your level of debt can affect the amount you qualify for. So think twice about applying for any other lines of credit if you’re applying for a home loan. The bank will just get the wrong impression of you. They’ll think you’re the type of person who shops ‘till they drop. It might compel lenders to turn you down.

Tip #5: Give a good down payment
The higher your deposit, the less you’ll need to borrow from the bank. And ultimately, the more you’ll save on interest. So if you want to keep your debt to the bare minimum, add extra cash to your down payment. If that’s not an option, try to pay a little extra (even if it’s just a few hundred rand) into your bond every month. You’ll soon see the benefits.

Getting the best loan, all comes down to that age old Scout mantra: “Be prepared!”

Here’s to your financial freedom,

CONTACT US
For more assistance with regards to Applying for Home Loan Finance .
Email: morne@mortgagepluscc.co.za
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