Tips for buying an off-plan or existing property.
Category Property Market
Property investment is a long-term commitment. Don't expect huge returns in the first one to two years.
This is according to Clint Wahl, Local Real Estate agent in Ballito, who says that from year three is when the returns start to make sense. "You should also benefit from capital appreciation moving into year three of ownership. "Rather buy a few lower priced properties than a higher priced one to spread your risk."
If choosing to buy an off-plan property investment Celia Tabb from the Midlands Local Real Estate office suggests that buyers ask the following questions:
- How long will the development take to complete?
- If I were to sell straight after the completion of my unit - will I be competitive in the market against a development unit that attracts No Transfer Duty?
- If I live in a unit in a still ongoing development what security options and insurance can the Developer give until such time as the Development is fully complete?
- Has the Body Corporate been formed with legislated Rules or is it still to be formed?
- Have the rates been finalised yet?"
- As this is still a new development what guarantees will be given regarding a snag list if there are any problems and what will be the procedure to ensure it will get rectified?
An article published on Property24 on June 7, 2021, features Chris Cilliers, CEO of Lew Geffen Sotheby's International Realty in the Winelands, who explains that if you buy from a developer the Consumer Protection Act (CPA) will safeguard you, whereas if you buy from a private seller the CPA doesn't apply.
Under the CPA, a purchaser has the right to:
- Within three months, instruct the builder to rectify non-compliance or deviation from the terms, plans and specifications of your mutually binding agreement;
- Within 12 months, instruct the builder to repair roof leaks attributable to workmanship, design or materials; and/or
- Within five years, instruct the builder to rectify major structural defects caused by non-compliance with technical building standards.
"Potential disadvantages include working through snag lists when you move in, the waiting period until completion might not suit you, and the choice of designs is usually limited."
Cilliers cautions that although buying off plan does have many significant advantages buyers should be aware of the following risks:
- You may not be able to visualise the end product from architectural drawings, plans or artist's impressions, so the final product may not be quite what you envisaged. It's essential to double check specifications and finishes to make sure the end product will be exactly what you wanted;
- If you buy into a development you may have to compromise on the date of occupation and transfer depending on the nature and circumstances of the particular development;
- And you will have far less control than if you were building your own home so always investigate the track record of the developer for quality of workmanship, financial stability, integrity and reliability. Find out about developments the developer has previously completed.
- To avoid any number of potential pitfalls, it's important to invest in developments where the developer has a good reputation and proven track record.
"In addition to only using an accountable and experienced Agent/Agency when purchasing a property always consider if you were to resell what are the pros and cons about the potential property. ie. be wary of steep driveways, lots of stairs, and other aspects that may hinder a potential sale further down the road."
"If you are buying an apartment or sectional title property check the levies and special levies so there are no hidden surprises that will affect you and especially the pet policies," says Hamilton Potts.
Harrison says as this will be the largest purchase you are likely to make, ensure you work with an agent you trust and who listens to you and understands your requirements regarding price and size of property.
"Ensure that the agent will guide you through the purchasing process especially and discuss important aspects such as location, security, schools, access to amenities like hospitals and shopping malls and access to Highways and Airports amongst others," he suggests.
Understand the entire costs of purchasing a property:
"It is important that first time buyers understand the entire costs of purchasing a property particularly that there are bond costs and transfer duty costs which are over and above the actual purchase price," says Richard Anderson of Local Real Estate, Ballito.
"There are differences between purchasing land, an already built property and off plan purchases. The agent should establish the end goal for the buyer to assist with this decision.," he says.
Local Real Estate agent Jake Morgan, says: "Being pre-qualified as a buyer who can afford a certain priced property is a definite advantage. This is a free service so use a trusted originator, as it also saves time on the purchase".
"When buying a ready built home, request the house plans and make sure that they are up to date and approved with an occupational certificate as sometimes renovations have not been approved by the municipality which really complicates the process. This is a vital piece of information.
"If buying for investment purposes, such as a rental property ensure you are purchasing in a popular area and usually less is more, as there is demand for a 2 bed 2-bathroom apartment. Avoid higher priced purchases as this means the rental needs to be higher and it could be a struggle to rent out," says Morgan.
In the meantime Rory Anderson another Local Real Estate agent in Ballito says, many buyers are now leaning towards secure Estates and complexes wanting security and facilities but even within these Estates, location is critical for future growth and resale.
"The properties that see the best returns on investment are those that are not on fence lines, that enjoy lovely outlooks and are also not too far from the entrance gate(s). It is also important for purchasers to think ahead and choose properties that will appeal to a wider market such as a lovely single level property as these will also enjoy faster growth than their counterparts with stairs and no gardens".
Author: Property24
