By: Gavin Lomberg
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 encouraged 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, here are five expenses that one should be aware of - and prepare for - on the homebuying journey:
1) 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 new locations will impact pricing. For example, movers will want to know if there are narrow streets, stairs or difficult entry points may result in additional fees. Lastly, extra services like packing, storage, and insurance can add to the overall expense.
We strongly advise any potential homebuyers to shop around for comparative quotes. When budgeting, always aim for a worst-case scenario figure to avoid financial strain and disappointment.
2) Rates, levies and not forgetting 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. Levies would typically range from R1,500 and up, 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. Similarly, we encourage freehold property owners not to overlook these costs and to budget for insurance, maintenance, and security.
Future homebuyers need to enquire about the levies in a complex and request financial statements before 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 too may hinder you from selling in the 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 any are 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.
3) 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.
4) 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 damage. Costs typically range from a few hundred rands per month.
Additional types of cover on offer from ooba Insure 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.
5) Home furnishings
Costs for soft furnishings, such as new curtains and blinds can add up quickly. When budgeting for a move, many people forget about soft furnishings - items like curtains, blinds, 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,” says Lomberg. And when it comes to saving, Lomberg shares his top tips to foster healthy savings habits as follows:
- 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.
* Lomberg is the CEO of ooba Home Loans.
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