Archive | July 2013

Homebuyers are giving stairs the cold shoulder

single-storey homes

After more than three decades of declining popularity, single-storey homes are making a comeback, thanks mostly to middle-aged homebuyers and their plans to “age in place”.

This trend is being influenced by the fact that although interest rates are exceptionally low at the moment, credit criteria are tough and transaction costs are high, causing many middle-aged owners and buyers to rethink their plans to buy a different property on retirement.

According to a survey by the US National Association of Homebuilders and the Metlife Mature Market Institute, some 90% of homeowners aged 45 and over now plan to stay put in their existing homes when they retire – and 45% of households will include someone aged at least 55 by the year 2020.

“And when you think about it, the biggest physical obstacle most of these people would probably face is climbing stairs,” says Stephen Melman, director of economic services for the NAHB.

Quoted on MarketWatch.com recently, he said: “As people are living longer, baby-boomers who have seen their own parents age in place often realise the benefits of single-floor living before they actually need them. But the one-storey homes being built today are not your grandfather’s ‘ranch house’. They are open and bright, and likely to contain many modern amenities.”

Nevertheless, the demand for older ranch and bungalow-style homes is also rising as younger families with small children rediscover the convenience and relative safety of living on one level – and first-timers start to think more in terms of “forever homes” than a series of “move-up” homes .

Denise Dersin, editor-in-chief of Builder magazine, says the renewed popularity of single-storey homes also has to do with a growing preference among homebuyers for established, “walkable” areas where the number of newer homes is limited, as well as the construction industry’s desire to provide more affordable homes for new buyers.

And, she notes, it is becoming more common for two-storey homes to be built with the master bedroom suite on the ground floor, because this creates a more flexible floor plan for two- or even three-generation households – “a way to accommodate those family members who can’t trudge up the stairs any more, or perhaps to create a separate living area for adult children or visiting grandchildren”.

Property market really needs a rate cut

Growth in the real estate market is now in danger of stagnating without an interest rate decrease or other deliberate intervention.

That’s the word from Rudi Botha, Chairman of BetterBond, and SA’s biggest mortgage originator, who says that although overall market activity has increased over the past 12 months, expansion has been limited because the number of new entrants has been dropping steadily.

interest-rates

“Our statistics show clearly that most of the current demand for both properties and new mortgage finance is being generated by existing homeowners who have, for one reason or another, decided to move or to acquire additional properties – and that something needs to be done to stimulate first-time buying and bring more ‘new blood’ into the market.”

The BetterBond statistics, which represent 25% of all bonds registered in the Deeds Office and cover home loan applications made to all of the country’s major banks, show that in the 12 months of end-May, home loan applications by first-time buyers accounted for 37,5% of the total number of applications, compared to 40,3% in the previous 12 months.

“And the declining trend has speeded up in recent months, with first-time buyer applications accounting for only 33% of the total in the past three months compared to 34,5% in the previous three months.”

The most likely reasons for this decline, Botha says, are also to be found in the BetterBond figures, which show that:

  • The average first-time buyer house price increased from R598 000 in April 2012 to R685 000 in April this year – a year-on-year jump of 14,5%;
  • The percentage of full or 100% home loans being granted by the banks fell from 38,5% of applications in April 2012 to 34,9% in April this year;
  • The average percentage of the home purchase price that first-time buyers are required to pay as a deposit rose from 10,7% in April 2012 to 14,3% in April this year.

“These factors have clearly lowered the affordability of home ownership for first-time buyers, and when one adds the rising costs of household essentials such as food, transport and utilities into the equation, it is really not surprising that their numbers are dropping.”

“Essentially, they need to be able to save a substantial deposit, and in order to do that they need to be able to lower their household debt levels. But given the fact that wage increases are currently just about keeping up with inflation that is unlikely to happen unless interest rates are now dropped even further.”

“Such a move would also stimulate economic growth and help to create new jobs, which would of course also be a positive move with regard to expanding the property market.”

Make sure high earners also get home loan help

house-pricesRecent high profile liquidations and sales in execution have clearly shown that over-indebtedness and trouble paying the bills is not just a problem for lower and middle-income families.

High earners are just as vulnerable to economic downturns and financial problems – and the banks know this, which is why they are just as careful in assessing their bond applications as they are in evaluating those from people with lower incomes.

However, we often find that high earners – those with incomes of R35 000, R50 000 or even R100 000 a month are unprepared for this, especially if they have been living in the same house for many years, and have not bought another property recently.

Indeed, they often just assume that they will qualify for a bond because they have a lot of money coming in every month, and may already have quite a large asset base. What they don’t realise is that in terms of the National Credit Act and their own lending criteria, the banks will now also look at how they are spending their money each month, and assess from that whether they are a good or bad credit risk.

In other words, the banks will scrutinise their credit records and sources of income and money management habits, and treat them pretty much like everyone else, and they unless they are forewarned of this, they may feel that their financial privacy is being quite unnecessarily violated.

In fact, the whole bond application process may become so distasteful to them that they will simply “walk away”, irrespective of whether there is a sale pending or not.

However, agents can avoid this – and potentially a lot of embarrassment all round – by always presenting home loan pre-approval as part of the buying process, and working with an originator such as BetterBond to help such buyers achieve pre-approval before they make any offers to purchase.

With the assistance of a qualified loan consultant, high earners can detail their earnings and expenditure in a calm and professional atmosphere, and generate and provide all the necessary paperwork for the home loan qualification process without fuss, and without the pressure of an impending transaction.

And most importantly, they can do so privately and confidentially, so they need not feel any embarrassment if they don’t qualify for the loan they had in mind, or need to tidy up their financial affairs before they can even lodge an application.

Remember, everyone feels happier if they know what they are doing and what to expect, and agents who help their buyers – high and low – to feel like this, will have “clients for life”.

7 Types of home owner’s insurance you need to know about

This week’s article was contributed by John L. Bradfield, and originally appeared on his blog “This ‘n That”. John is a Real Estate professional with 20 years’ experience in this industry. He is based in Hermanus, the whale-watching capital of the world.

Home-Insurance

If you own a home or are thinking of buying one, home owner’s insurance is a necessary evil and can even save your investment one day. But there are many different types of policies out there that can be confusing to the average home owner.

Below, are seven different kinds of home owner’s insurance to help you make sense of it all.

1. Basic
The liability coverage of the home owning insurance world is the basic. This type of policy covers only the basics but includes items such as fire, wind-storms, theft, and even volcanic eruption.

2. Broad
This insurance policy covers everything in the above, plus a few more. It adds on coverage for issues such as snow, plumbing damage, and even damage caused by faulty electrical wiring.

3. Special
More common than the above, special policies allow the home owner to choose the kind of coverage they want. For example, someone on the West Coast isn’t terribly interested in hurricane coverage, while someone on the East isn’t too concerned with earthquake damage.

4. No replacement
Those who have older homes that just aren’t built that way any more can be subject to this type of insurance. While it can cover all the perils of other home owner’s insurance, it pays for the cost of your home minus whatever depreciation it has incurred instead of having it rebuilt the way it was.

5. Condo
If you own a condominium in a complex, it doesn’t make sense to have the outside of your home insured. However, everything on the inside is still subject to damage right down to the appliances. This kind of policy covers personal property and can also be tailored to fit the needs of the individual.

6. Town-house
Somewhere between the traditional home and condo is the town-house. While owners of town-houses also need to insure the outside of their homes, insurance needs are different because town-house owners are also usually part of a complex.

7. Renter
Even if you don’t own a home, insurance is still an important option to consider. For example, someone renting an apartment that gets flooded will have their landlord footing the bill for damage to the unit. However, the renter will not be covered for any furniture, electronics and other items that may have been damaged in the flood unless they have renter’s insurance that covers it.

For more information or an obligation-free quote, get in touch with BetterSure.

How small is too small?

Small houseWe recently mentioned how much the average home size in South Africa has decreased over the past few years – pretty much in line with the trend towards smaller homes all over the world.

Now comes the news, though, that consumers in the UK might be starting to resist the shrinkage, even though the average home there is still much bigger than many of those being built for low-income owners here.

“Developers faced with sky-high land prices are now often cramming a lounge, kitchen, bedroom, and bathroom into just 46 sqm – which is the same size as a Jubilee Line tube carriage,” the Daily Telegraph reported recently.

It also quoted the Royal Institute of British Architects (RIBA) as saying that outside of London, there were no minimum standards and regulations for home builders on the size of a house or flat, and that a room was required to have natural light from just one window measuring 45 cm x 45 cm, with the result that “thousands of people are now living in a cramped, dark, artificially lit environment”.

The average British home is now 76 sqm, according to the RIBA, and has shrunk from 5,2 rooms to 4,8 rooms – and owners are not happy.

“A third of homeowners (32%), say they would like more space, and 20% would like more natural light. In fact, for those living in a home that is two to 10 years old, a lack of space is their main reason for wanting to move out,” the Telegraph reported.

“Three quarters consider a lack of space a ‘key problem’, and 69% say they do not even have enough room for their possessions.”

And the RIBA report on which the Telegraph article was based says research suggests that consumers are right to be worried about homes shrinking beyond a certain point and becoming just too small.

“A lack of space has been shown to impact on the basic lifestyle needs that many people take for granted, such as having enough space to store possessions or even to entertain friends. And in more extreme cases, a lack of adequate space for a household has also been shown to have significant impacts on health, educational attainment, and family relationships.”

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