All together now

Banks are allowing groups of people to buy a property as a collective, but an expert warns there are pitfalls to guard against

Q: MY GROUP of friends is considering purchasing an investment property together as we can now, apparently, apply for a joint mortgage. Is this true? And if so, is it a good idea?

A: Lenders have recently started launching some very innovative collective home-buying schemes.

These are primarily targeted at making the housing market more accessible to the average citizen by enabling them to pool their resources and buy as a group.

While the opportunities are great, the risks of collective buying are also considerable.

For this reason, proper preparation and support are going to be key.

As with all shared bonds, if one or more parties find themselves unable to cover their portion of repayments, the other bondholders will be held liable for the shortfall. That means, in a worst-case collective buying scenario, one individual could theoretically end up shouldering as many as 11 other people’s repayments.

Making sure co-applicants are trustworthy and able to comfortably meet their repayments is a good way to minimise this risk, but that doesn’t remove the need for iron-clad contracts outlining procedures for all possible eventualities.

Details like property maintenance and management, the handling of a future sale and how to exit or end the co-ownership if necessary all need to be considered. – Tony Clarke, managing director of the Rawson Property Group

Q: We may need to sell our home in a hurry if my partner is offered a job overseas, but we obviously don’t know how much time we will realistically have based on the current market. We also do not want to sell now in case he does not get employment. How long does one wait, on average, for a property to sell?

A: The sale of a property involves multiple steps and can be a lengthy process. Sellers must allow time both to find a buyer who will make an acceptable offer, and for the transfer and registration process to be completed.

Finding the appropriate buyer for the home will depend on several factors, and the average time on market will differ from suburb to suburb and will depend on demand for the area as well as the price and condition of the home itself.

Our latest National Housing Report reveals that homes priced between R800 000 and R1.5 million account for 28% of all transfers.

However, homes priced over R3m accounted for just 6.8% of transactions. Because demand is much higher for homes priced below R1.5m, it will be much quicker to sell these homes compared to homes priced over R3m.

Homes that are move-in ready and do not require any repairs or renovations also tend to sell quicker than fixer-upper properties.

On average, a well-priced home in good condition in an active market should be sold within three months or less. – Adrian Goslett, chief executive of Re/Max of Southern Africa

Q: With the interest rate starting to rise, is it really still a good idea to buy property for investment purposes, specifically a buy-to-let?

A: Despite indications that interest rates are on a slow, but steady, upward trajectory, fierce competition between banks for market share ensures a favourable lending environment which, coupled with an ongoing strong demand for homes among first-time and repeat buyers alike, is expected to provide South Africa’s housing market with a solid underpinning during the year ahead.

From an investment perspective, Lightstone’s forecast scenarios suggest home values could rise by between 3.4% and 5.1% in 2022.

According to the Pam Golding Residential Property Index, national house-price inflation (HPI) averaged at 5.1% last year, compared to 3.7% in 2020 and 2.6% in 2019.

The Western Cape region recorded the strongest growth in prices in 2021, at +6.2%, followed by KwaZulu-Natal at +5.3% and Gauteng +4.5%.

The index also shows that, nationally, the lower price band below R1m continued to register uninterrupted growth in 2021. However, the R1m to R2m price band registered the strongest growth during the year as a whole. – Andrew Golding, chief executive of the Pam Golding Property group

Q: I would like to let my property but I have heard that there are rental scams being perpetrated in the market. What can I do to avoid falling victim to rental fraud?

A: There is value in using a reputable estate agency that has experience and expertise in assessing tenants beyond what you see on paper. Estate agencies use credit bureaus and the Tenant Profile Network (TPN) to evaluate potential tenants, with the permission of the tenant as required by the Protection of Personal Information Act.

Most agencies are listed on the TPN, where tenant-specific profiles linked to rental payments are created so that agents can access data to see if they have been flagged for non-payment or erratic payment. It also links to their payment profile on other loans, such as clothing accounts, credit cards, car repayments, etc.

But the vetting process should not stop there. It is vital to directly appraise employer and salary records and speak to references provided to fully ascertain the calibre of tenant. A good paying tenant who does not look after your asset can also cost you dearly. A good credit report, sufficient affordability and good references are absolutely non-negotiable.

There have been documented incidents of fraudsters sending through falsified bank statements, payslips, IDs, as well as proof of payments. If landlords choose to let their properties privately, as an added safeguard I would advise that a tenant be allowed to move into the property only once the deposit and the first month’s rent reflect in their bank account. Do not rely on a proof of payment being sent through as it is very easy for fraudsters to produce false proof of payments. – Catherine de Villiers, rental consultant at Jawitz Properties

HOMES valued in the R1million to R2m price band registered the strongest price growth last year. PICTURE: RODOLFO GAION/PIXABAY