With the recent shortage of housing stock in certain areas, especially the Western Cape, we see new housing developments shooting up at an alarming rate all around us.
This means the demand for existing housing stock outweighs the current levels available, and so the need for new houses has increased drastically in the popular areas. This is in a large part due to the 3000 odd people relocating to Cape Town and surrounds from the rest of the country each month, seeking greener pastures in the form of lifestyle, security, better schooling for their children, and the list goes on. I don’t need to sell this beautiful part of the country we live in, it speaks for itself. The need for security estate living especially, has increased significantly and this brings us to this week’s topic.
When you buy a house in a new development, there are a few steps of the process that are slightly different from the norm.
– Firstly, you need to be aware that you may have to live with building work all around you for months, sometimes even years after you move in, depending on when in the phase timeline you purchase. Some people prefer to secure their erf first, and build at a later stage, but most developments will place a limit on the time in which you need to build a house on the vacant land you have purchased.
– You are buying a brand new property, so if the building work is not of a very high standard you might be the lucky one to experience those plaster cracks & leaking roofs first, and subsequently need to report it to the developer/builder to be fixed, unlike buying a second hand property where the previous owners would have probably fixed the major defects. Most brand new houses have ‘growing pains’, so be prepared to possibly have to deal with this.
– Estate living normally brings with it high levies. Someone has to pay for the state of the art security, manicured gardens & open areas, and amenities normally found in especially the more upmarket estates.
– On to the positives! You are buying a property that will, for the foreseeable future at least, show significant growth in value due to the high demand for this type of product.
– You save on transfer costs, as you are normally the first owner of the property, so there is no need to have it transferred from one owner to the next. Bond registration costs are sometimes included, mostly if you choose to apply for your home loan through the developer’s choice of Bond Originator. This means a massive saving on the normal attorney’s costs involved in a property purchase.
– The bond application process itself is not as complicated as people think.
Onto the actual securing of finance to purchase a new development property. Some developments require you to apply for a building loan as the development has not been approved by the banks and/or the specified targets for pre-sales have not been reached as yet. This means you have to provide building plans, the building contract (most often takes the place of the Offer To Purchase) schedule of finishes, etc. in addition to the basic document requirements the banks have.
In other instances you might buy in a turnkey development, which means the development has been approved by the banks and they have issued a development approval letter. This type of application only requires the basic documents for bond approval.
Ask the relevant questions before entering into an agreement to purchase a property in a new development, to fully benefit from the many positives this property type could bring.
Yours in Home Loans…