It’s not all about interest rates.
With interest rates at a multi-year low, now is an opportune time for first-time homebuyers to step into the property market.
However, when it comes time to budget, potential homebuyers are urged to account for several important, but often overlooked, costs.
While home loan pre-approval gives homebuyers a clear idea of what they can realistically afford, many still overlook the additional costs of homeownership that can quickly add up. In addition to widely known expenses such as bond registration and transfer costs, this article highlights five expenses that one should be aware of (and prepare for) on the homebuying journey.
Moving and Transport Costs
The cost of moving house in South Africa depends on several factors, including the distance of the move, the volume of belongings, and any additional services required.
Research shows that local moves tend to be more affordable, with prices starting from R1,500 (depending on the size of the property). For long-distance moves, costs can range anywhere from R4,000 to R15,000, depending on the distance and volume of items being transported.
Another factor is accessibility. The accessibility of both the current and the new location will impact pricing. For example, movers will want to know if there are narrow streets, stairs, or difficult entry points that may result in additional fees. Lastly, extra services like packing, storage, and insurance can add to the overall expense.
Potential homebuyers are strongly advised to shop around for comparative quotes. When budgeting, always aim for a worst-case scenario figure to avoid financial strain and disappointment.
Rates and Levies (Including Special Levies)
Purchasing a sectional title property (a home located in a larger complex such as a townhouse and apartment) comes with the obligation of paying monthly fees in the form of levies.
Levies are monthly payments made by owners of sectional title properties to cover the costs of maintaining and managing the property. These would typically range from R1,500 upwards, with some of the higher levies exceeding R10,000 per month in exclusive lifestyle estates.
Levies are generally put to good use and are allocated to insurance, security and access control, building maintenance and repairs, sewerage, refuse removal, water, and electricity costs in common areas.
However, freehold property owners should not overlook these costs and will also need to budget for insurance, maintenance, and security. Furthermore, sectional title levies normally do not cover any costs relating to the inside of one’s section.
Future homebuyers are urged to enquire about the levies in a complex, and to request financial statements prior to putting in an offer to purchase (OTP).
It’s important that you have a clear picture of the complex’s financial standing. A complex in debt will often require more special levies, and this may hinder you from selling in future.
Owners may also be required to pay once-off special levies for major expenses like roof repairs, waterproofing, painting, or security upgrades. While these costs are often unexpected, it’s wise to review the complex’s history of special levies and to check if there are any planned for the future.
Owners of both freehold and sectional title properties will need to budget for rates and taxes—a fixed monthly fee based on the property’s value.
Utilities
If you are buying a freehold property, you will need to register for your water and electricity connection, and your telephone and internet lines (if required).
These costs vary from area to area, and the internet fee will depend on the type of connection that you want, and whether the relevant lines are already installed. It’s advised to put aside between R1,000 to R3,000 for the connection of your electricity, telephone, and water.
Home insurance
A home loan will only be approved by the banks if the homebuyer has taken out building insurance. This particular type of cover is used to insure the structure of your home, and will cover you in case of fire, geyser bursts, and structural damages. Costs typically range from a few hundred rands per month.
Additional types of cover on offer include bond protection cover and home contents cover. While bond protection insurance is generally not a necessity to secure a home loan, it is recommended as it guarantees that your home loan repayments will be covered in the event of unemployment, disability, or death.
Home contents insurance cover is also not mandatory, but it does afford you protection against loss, theft, or damage to your personal and home possessions.
Home furnishings
Costs for soft furnishings, such as new curtains and blinds, can add up quickly.
When budgeting for a move, many people also forget about items like rugs and furniture that will fit into and complement the space. Your old curtains may not fit new window sizes, carpets might need replacing, and additional décor touches could be required to match the new space.
Top saving tips
When budgeting, always plan for worst-case scenario figures so that you are adequately covered.
When it comes to saving, here are some tips to foster healthy savings habits.
- Open up a separate interest-bearing account for your savings.
- Draw up a budget, and stick to it.
- Automate your monthly savings to stay consistent and get into the habit of not having this money readily available.
- Track your spending to identify any unnecessary expenses or places where you can cut down.
- Prioritise your debts to maintain a strong financial standing.
The journey to homeownership is an exciting one, made possible by strong financial habits. Prioritising and tracking your spending and savings are essential tools that will set you up for long-term success.
WRITTEN BY GAVIN LOMBERG
Gavin Lomberg is a home loan specialist.
While every reasonable effort is taken to ensure the accuracy and soundness of the contents of this publication, neither writers of articles nor the publisher will bear any responsibility for the consequences of any actions based on information or recommendations contained herein. Our material is for informational purposes.