Here’s what it will cost you to buy a home in South Africa
Warm fuzzy feelings can erode the need for rational thinking when buying a home. And the hard questions about hidden costs forgotten today can cause heartache tomorrow.
A host of additional costs lurk in the background when buying a home and these can add between 8% and 10% to the cost. That’s significant in anyone’s language and highly pertinent when prices for everyday essentials snap upwards every time we blink.
Samantha Nel, Pam Golding Properties sales manager for Cape Town’s Southern Suburbs, gives purchasers upfront advice regarding the costs of buying a home.
“A property purchased using a bond is forced saving over time,” she says. “By paying off your bond as quickly as possible you save on interest and benefit from the capital appreciation of your asset, enabling you to trade up in the future. Always keep within your budget. Rather buy something smaller in a slightly better area and then if possible stay in the home for five years before selling to benefit from capital growth.
“Ask your estate agent to explain all the costs to you upfront. There are transfer costs, monthly mortgage repayments, rates, municipal tariffs and levies. Also ask your agent to give you an estimated timeline for the transfer process and check whether you are liable for occupational rent.
“Remember that transfer costs are payable before transfer and this liquidity is probably not available in your bond. The seller needs to settle all outstanding municipal rates in order for your transfer to take place. Don’t forget that you will need to pay a pro-rata portion of the rates in advance.”
Nel recommends that purchasers who buy into a sectional title development inspect the body corporate’s financial statements to ascertain if the complex or apartment block is financially sound.
Here’s an overview of the costs involved in buying a property
To secure the purchase of the property if you are not a cash buyer. Some buyers will qualify for a 100% bond and therefore won’t need to place a deposit with a financial institution such as a bank in order to secure a bond. But, generally, deposits of between 10% and up to 50% are required by financial institutions depending on the buyer’s financial standing and the bank’s value in the property. The bigger the deposit the less the monthly bond repayment. The deposit falls outside of the 10% of hidden costs since it is an upfront payment and is paid to the transferring attorneys.
This once-off fee is charged by a bank if you are granted a bond and can be paid upfront or added to your loan. The regulated fee is a maximum of R5,000.
This is a once-off tax for the transfer of a property into the buyer’s name.There’s no getting away from paying transfer duty to SARS via the transferring attorney unless you buy your home directly from a developer (or another VAT registered vendor) or unless the price tag of the home you buy is under R900,000, the new threshold in the revised transfer duty tables published last year. The higher the price of the home, the more transfer duty you pay to the government. See the SARS website for a table showing how much duty you will pay.
Conveyancer’s fees/bond registration fees
A firm of attorneys has to undertake a conveyancing service to get your bond registered over the title deed of your new home. The size of the fees is dependent on the size of your bond and may vary from attorney to attorney. Anton Bartman of iSellProperty points out that the seller usually nominates the transferring attorneys and therefore it is unusual for these attorneys to be open to negotiation over their fees. But some buyers have been successful in getting the fees lowered. Attorneys undertaking bond registration also charge a small fee for sundries to cover variables such as postage and petties.
Deeds office bond registration fee
The deeds office charges a fee to undertake the legal registration of your mortgage bond. That fee is tied to the size of your bond. Check HomeTimes 31 May 2018 for the fees you can expect to pay. See an abbreviated fees table under the heading: Here’s what your transfer and bond fees will cost from 1 June 2018. For a full table of costs see the tables at the end of this article.
Rates clearance certificate
You need to be sure that the owners from whom you are buying the property do not leave you with an unpaid rates account. The conveyancers usually include sourcing this certificate from the municipality in which the property is located and therefore include this service in their bill.
Municipal rates and taxes
As a new owner you need to register with and pay a deposit to your local municipality for rates and taxes as well as for services such as water, sewage, refuse removal and electricity. The amounts of such deposits vary from municipality to municipality and are usually tied to the value of the property. Check the valuation of your new property on the municipal valuation roll. In some peri-urban areas you need to register for electricity directly with Eskom and pay a deposit.
This insurance is required if you have bonded the property with a bank. The cost of this insurance is included in your bond repayment. It covers risks such as damage to your home’s structure (bricks and mortar).
For your own peace of mind, get your own survey done of the building unless you are happy with the report provided by the seller. The report from the seller must include latent defects and must be signed by the seller. Your expert will undertake an independent inspection to check for problems such as rising damp, roof leaks, plumbing issues, structural cracks and other defects.
Such rent is due only if you take occupation before transfer of the property into your name. The amount must be negotiated and included in the Offer to Purchase document.
An existing life insurance policy can be ceded to the bank to cover the balance of the bond in the event of your death, or you can negotiate a new policy.
Home contents’ insurance
This policy is optional and covers losses for the contents of your home arising from fire and theft.
If you buy a home in a sectional title development such as a cluster, townhouse or apartment block, you will be liable for monthly levy payments to the body corporate to cover costs such as security and maintenance. Check the body corporate’s annual report, get a copy of a recent levy statement and talk to the chairperson about the levy figure and when levies were last raised.
Inclusions and exclusions in your new home
Agree upfront with the seller about what fixtures and fittings are included in the price. Include such items in your offer to purchase. These items can include equipment such as satellite dishes, air conditioning units and even curtain rails. You may want to negotiate to buy soft furnishings such as curtains in certain instances.
Removal costs, especially if you’re moving from city to city, can be substantial. And don’t forget items such as the installation of fibre optic cabling and internet fees. You can save a little by renting or buying cardboard removal boxes and packing your own breakables and other items.
** Deeds Office fees for the registration of (a) transfers and (b) bonds increased from 1 July 2018.
(a) A transfer of which the purchase price/value of property, whichever is the greater
|(i)||does not exceed R100,000||36,00|
|(ii)||exceeds R100,000 but does not exceed R200,000||78,00|
|(iii)||exceeds R200,000 but does not exceed R300,000||486,00|
|(iv)||exceeds R300,000 but does not exceed R600,000||606,00|
|(v)||exceeds R600,000 but does not exceed R800,000||852,00|
|(vi)||exceeds R800,000 but does not exceed R1,000,000||978,00|
|(vii)||exceeds R1,000,000 but does not exceed R2,000,000||1,098,00|
|(viii)||exceeds R2,000,000 but does not exceed R4,000,000||1,522,00|
|(ix)||exceeds R4 000 000 but does not exceed R6 000 000||1,846,00|
|(x)||exceeds R6,000,000 but does not exceed R8,000,000||2,197,00|
|(xi)||exceeds R8,000,000 but does not exceed R10,000,000||2,568,00|
|(xii)||exceeds R10,000,000 but does not exceed R15,000,000||3,057,00|
|(xiii)||exceeds R15,000,000 but does not exceed R20,000,000||3,671,00|
(b) a bond of which the capital amount –
|(i)||does not exceed R150,000||376,00|
|(ii)||exceeds R150,000 but does not exceed R300,000||486,00|
|(iii)||exceeds R300,000 but does not exceed R600,000||606,00|
|(iv)||exceeds R600,000 but does not exceed R800,000||852,00|
|(v)||exceeds R800,000 but does not exceed R1,000,000||978,00|
|(vi)||exceeds R1,000,000 but does not exceed R2,000,000||1,098,00|
|(vii)||exceeds R2,000,000 but does not exceed R4,000,000||1,522,00|
|(viii)||exceeds R4,000,000 but does not exceed R6,000,000||1,846,00|
|(ix)||exceeds R6,000,000 but does not exceed R8,000,000||2,197,00|
|(x)||exceeds R8,000,000 but does not exceed R10,000,000||2,568,00|
|(xi)||exceeds R10,000,000 but does not exceed R15,000,000||3,057,00|
|(xii)||exceeds R15,000,000 but does not exceed R20,000,000||3,671,00|
|(xiii)||exceeds R20,000,000 but does not exceed R30,000,000||4,278,00|
Words: Blake Wilkins