Greenleaf Property Developers

Potential first time home buyers may currently be wondering whether they will ever be able to afford a home, but there's no reason why they should give up trying, says a property expert.

Potential first time home buyers may currently be wondering whether they will ever be able to afford a home. FNB's quarterly Residential Property Barometer for Q4 2007 shows that the proportion of first time buyers entering the market halved from 32% in second quarter 2005 to 16% in second quarter 2007.

However, there's no reason why first timers should give up, says Mike Bester, CEO of Realty 1 International Property Group.

"The average age of the first time buyer has reduced substantially over the past twenty years," says Bester. "In the eighties, very few people could afford to buy property before the age of thirty or older. These days, young graduates in their first job expect to be able to buy their own homes – and they are particular about the standard they want too." But there are very few people who can afford their 'dream home' at such a young age, he says, and young buyers should focus on getting into the market at a level they can afford.

Bester believes now is the time to go back to basics and save. "Young people should hopefully not yet have high monthly debt repayments," he says, "which puts them in a good position to be able to cut down on expenses and pass the NCA's surplus funds requirement. Visit your bank and find out what sort of home loan you qualify for, and what the monthly repayments will cost you – even if interest rates go up by another few percent."

Once you know what you can afford to pay on a bond, says Bester, you should start putting away the difference between that amount and your current rental on a monthly basis. "Not only will this be an excellent basis for your deposit," he says, "but it will also teach you the financial discipline of making that monthly payment. The average buyer these days needs a 10% to 20% deposit on the price of the property, as well as enough to cover transfer fees for properties over R500k, attorneys' fees and bond registration costs."

Bester also recommends putting aside funds for a professional inspection of the property before making an offer to purchase, as well as allowing for other costs involved in owning a property, many of which first time homeowners are not aware of or don't take into account. These include items such as furniture removal costs, monthly rates and taxes, insurance and utility deposits and bills once the house is registered in your name.

"You need to list these costs and draw up a budget correctly before signing an offer to purchase and being burdened with costs you may be unable to afford," advises Diana McIlrath of Shepstone & Wylie Attorneys property department. She advises that prospective buyers should make a list of all of these costs and put down an approximate figure next to each item, before signing a sale agreement which binds them to their purchase of their dream home.

When it comes to finding the right property, Bester says that the slowdown in the residential market is an advantage for first timers, as there are definitely bargains to be found. However, he says that once young people start looking for a home, they should remain realistic about what they can afford and not get carried away by advertising hype.

"There are many ways of affording that first property," says Bester. "First, don't buy bigger than you need. Until you start a family, a one bedroom home is all you really must have, and many new developments have smaller units available in the same secure estates as the larger units."

"Second, if you go for plot and plan, consider using alternative building methods. Steel and timber frame housing are now acceptable forms of construction, and can reduce building costs from around R4500 per sq metre to R2800 per square meter. Under certain circumstances these homes can even be financed by a traditional home loan, although not all the banks are convinced yet."

Sharing with friends or family is another option, says Bester, and two young couples sharing a large, freestanding home gives both a viable asset for the future. "Just be sure to have a watertight contract drawn up by a lawyer to make sure all parties' interests are protected," he says.

Often cheaper properties are to be found in the more outlying areas, but buyers should weigh up what travelling will cost against the savings on the cost of the property. Security in such areas can also be an issue, and cannot be compromised, he says.

Bester says he fully supports all the efforts to introduce government subsidies and tax incentives for first time buyers, but he believes these options are a long way off and young people should make every effort to get into the market, even in the current economy.