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Homeowners are moving less frequently

The costs associated with moving up or even downsizing have become prohibitive for many.
Disposable incomes as a percentage of property prices have dropped in the past 15 to 20 years, while the cost of selling and transferring property has increased. Picture: Moneyweb

During the property boom years, homeowners who felt the itch to move could do so far more easily than the property owners of today.

First-time home buyers, in particular, are hanging onto their properties for longer. Lightstone Property data from 2017 shows that first-time property owners are hanging onto their properties for around 12 years, whereas during the property boom years between 2003 and 2005 the average was seven years. Repeat owners are holding onto their properties for between seven and nine years, as opposed to three years during the boom years.

John Loos, property strategist at FNB, says the higher cost of selling and transferring properties is one reason homeowners are hanging onto their properties longer. “Since 2000, property values have escalated by well over 300%. Disposable incomes have not gone up at the same rate, which makes purchasing a property less affordable for the majority of people. Then you have estate agents’ commissions of around 5%, transfer duties, conveyancing and other fees associated with the purchase of a property, which makes it more expensive to buy.”

The speculative boom in properties came to an abrupt end after the financial collapse of 2008, although South African property values were shielded to a large extent from the kind of price corrections evident elsewhere in the world. “A decade ago a significant number of people were buying and flipping properties within one or two years to make a profit, or to upgrade. Those days are gone. Disposable incomes as a percentage of property prices were better 15 or 20 years ago. There’s been no big price correction in the property market as yet, and banks are stricter in lending money compared to the boom years, which makes affordability a key issue in the decision to hold onto properties longer,” says Loos.

FNB’s latest Estate Agent Survey canvassed estate agents on the reasons clients were selling their homes. Four years ago, roughly 20% said they were selling to upgrade. Today the figure is 10%, which Loos says is indicative of the deteriorating economic climate. Also on the increase is the number of people selling due to financial pressures, now accounting for 16% of sellers – although this is substantially lower than the 34% at the peak of the financial crisis in 2009. Other reasons for selling are emigration and downscaling due to ‘life stage’ – generally, older people moving into smaller, more secure residences.

The residential property market is valued at R5.3 trillion, with a total of 6,6 million residential properties. Roughly a third of these are bonded to the banks.

Source: Lightstone Property

Banking Association SA (Basa) figures from 2016 show that roughly 4.4% of bond accounts are in default, though fewer properties are being sold as a result of sale-in-execution orders granted by the courts. Roughly two-thirds of scheduled sales in execution were cancelled before the auction date, suggesting that banks are being more accommodative towards customers in default.

“The property boom years are behind us, and I think the trend of people staying longer in their houses is here to stay for the foreseeable future,” says Loos.

Data from Lightstone shows Standard Bank steadily increasing its share of residential mortgage advances, while Absa has shown a slight decrease in advances since 2013. FNB, Nedbank and Investec have all shown modest growth in their mortgage books since 2013.

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The fees associated with purchasing a home are a complete travesty. Where exactly do these fees go? I suppose this is just another hidden tax that South Africans must pay. On a home costing around a million and a half, the fees are well over R100K. Who can afford this? In the end, it is the banks that benefit from the whole rotten deal as most people not only have to bond the cost of the home, but the fees as well. So to add insult to injury, you have to pay interest on it too!

Not just the banks, transfer duties go to SARS.

The biggest item on your transfer costs account by far is actually the transfer duty payable to SARS. The other items such as the conveyancing, bank and deeds office fees are relatively small compared to the transfer duty, especially on more expensive properties. Transfer duty is a form of wealth tax for which you get nothing in return, remember that you will also be paying municipal property tax on a monthly basis. If our esteemed guavament was really serious about land redistribution, they would have done away with transfer duty so that home ownership becomes more accessible, but then there would be no money to pay for the fancy cars and lavish hotels of ministers etc, which is just totally unacceptable to our fake Gucci communist leedas….

I suspected as much… just another tax for which we get nothing in return! S. Africans are being taxed to death.

Pay the fees in cash then.

How can I buy an investment property if I have sufficient capital but I am not working and I don’t want to deplete my capital?

Do not buy an investment property. You have single tenant risk, maintenance, EWC, illiquid, huge entry costs etc. Buy a portfolio( not more than 5% in 1 single share) of high dividend US and Global shares-ATT yields 6%, Swiss Re 5% -gear it 40% LTV and you have a much better deal-try saxobank or meritrade-way better deal!!!

Tiimo, if you let the renter pay the bond you will NOT have any money for 20 years! You get 20 years of tenant’s from hell, repair work, runners and just try to evict someone who will not leave. Who pays the rent then?? If you buy it, pay it off in 7 years by adding an additional 25% to the bond payment. Dr. Debt

With entry level (nice) houses over R 1,000,000 it actually prohibits first time home buyers. Also, with the realtors trying to get the best price, house values have gone up uncontrollably. So if you look at someone in their 30’s with 2 kids-There’s school fees insurances, car payments (2?) There’s a rising food bill and transport costs. So would you sign a bond for 2 Million and solidly be paying R 19,300 PER MONTH FOR 20 YEARS AND INTEREST RATES ARE GOING UP !! I say No! Dr. Debt

The slow and steady erosion of the middle class is well underway. Go on, let’s not dilly-dally any longer, get that EWC ball rolling and finish the job Cyril!

Yes do have a look at all the costs, which not only include transfer costs, but the money you may spend due to dishonest sellers and incompetent, greedy listing agents. Downgrading has cost me sleepless nights and a whole spectrum of emotions. My advice is hire an inspector to go over the property you wish to buy, cross out the word voestoets from the the offer to purchase. A thorough inspection by an amateur is not enough as you are certainly not able to shower,(geyser problems) inspect the garage motor and unless you have a ladder climb on to the roof. You may think that if the seller signs that everything is in order this is enough protection. This is not so as the purchaser has to prove that the seller knew about the latent defects. A very difficult task unless there is money for legal fees.I eventually managed to get the seller to replace the garage motors, but that was it!!! A downgrade has turned out to be a very expensive exercise for a 72 year old pensioner.

End of comments.





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