Buying a home? Factor hidden costs in . . .

Property 24 Newsletter -- 1 Feb 2010

Most prospective buyers only calculate the amount that they have to fork out for the bond each month. But the bond isn’t the only expense buyers have to be cognisant of before signing on the dotted line as there are several extra expenses, most of them once-off, that they have to contend with.

Property24 spoke to some industry experts to get a breakdown of these costs.
Laurie Wener, Pam Golding Properties’ (PGP) MD for the Western Cape, says on top of the bond, transfer duty is levied at 8% for properties over R500k if it’s a primary residence. “If not a primary residence or purchased by a juristic person, then no abatement. This amount cannot come out of the bond as it is required to be paid upfront and prior to registration, i.e. before the money from the bond becomes available.

“Transfer and bond costs are for the purchaser’s account while the capital gains tax (CGT), agents’ commission, electrical and beetle inspection, as well as remedy and bond cancellation costs, are the seller's responsibility.” “This holds true for sectional title as well as full-title,” Wener says. She says buyers should also have sufficient cash available for a deposit – this may be 10% or less.

Adrian Goslett, CEO of RE/MAX of Southern Africa, points to conveyancing, bank inspection and mortgage arrangement fees as additional expenses. “The conveyancing attorney’s fees, normally calculated at a sliding scale of 1% to 2% of the purchase price of the property (in South Africa), will form part of your mortgage bond registration costs. The higher the home loan, the higher the conveyancer’s legal fees will be.

“Bank inspection fees amount to approximately 0,2% of the total valuation of the property while the mortgage arrangement fee makes up approximately 1% to 1,5% of the loan amount.
Wener says depending on size and cost of property, and over and above all the specific costs of transfer and moving, it is recommended that a budget of anything between R5k and R50k be set aside for small maintenance such as moving damage, locksmith costs, cleaning, and unforeseen expenses.

Goslett says water and electricity connection fees need to be taken into account for full-title homeowners. “According to the City of Tshwane Municipality, water and electricity activation totals to approximately R220 for the Pretoria region, for example. Telephone connection fees also need to be taken into account. Telkom’s residential installation and transfer fees vary between R300 and R400 per line activated.”

He says full-title property owners also need to include municipal property rates and taxes into their budget. “These are determined by the use of the property and its value among others, and differ from region to region.

“Sectional title homeowners will need to pay a levy which differs from complex to complex. The levy will usually include water, but exclude electricity fees. The levy also usually includes security services for the complex as well as the maintenance of common areas and facilities.”
“The higher the value of the property, the higher your insurance premium will be. Also get quotations. Often buyers just accept the bank’s recommended insurance company for ease of use. This isn’t necessarily the best cover nor the best rate.

Maintenance is also a big issue, he says, and adds that a bigger home will require more maintenance. “A bigger garden may require a full-time gardener. A swimming pool needs chemicals. These are expenses people tend to forget about when buying a home. Inspect the home or use a reputable company to do the inspection on your behalf before you make one of the biggest investments in your life.

He says although a once-off expense, moving furniture can be a big expense, especially if it is from one province to another. – Eugene Brink