Renovate or buy in Simon’s Town
September 18, 2007 – 9:19 am | by JohanNew Here? You’re Invited To Simon’s Town News Updates Subscribe here.
Do you renovate or buy? It depends. If you are looking to buy property in Simon’s Town this is a time to buy. If you are looking to sell you need know all the cost associated with selling your property in Simon’s Town and then buying another property somewhere else.
The process of selling and buying could well cost you more than upgrading your existing home. September 17, 2007
By Charlene Clayton
In today’s buoyant property market, it’s easy to get caught up in the excitement of selling your home and using the profit to buy a bigger, better one. But you need to explore the viability of such a move because the process of selling and buying could well cost you more than upgrading your existing home.
To misquote Shakespeare, “To sell or not to sell” is the question facing many a property owner. Property prices have rocketed over the past few years and you are likely to make a packet if you sell your property now, especially if you have owned it for many years. However, with property prices at an historical high, due to low interest rates and increased demand, now is not an ideal time to buy.
According to the Absa House Price Survey, the average price of houses in the middle market in South Africa increased by more than 32 percent during 2004 – the highest annual increase since 1981. However, the pace of growth has been slowing since late last year. A nominal year-on-year growth of 26 percent was recorded in March this year, and by April year-on-year growth slowed to 23.6 percent. Absa defines the middle market as houses of between 80 and 400 square metres in size that cost R2.2 million or less.
Strong growth was also recorded in all the provinces and major metropolitan areas nationwide. For instance, when comparing prices in 2003 to 2004, house prices shot up by just over 33 percent in the Cape Town and Durban metropolitan areas. House prices in greater Johannesburg gained 28 percent and properties in Pretoria increased in value by more than 24 percent.
However, unlocking the value in your property, especially in the current booming market, is not so simple. While you may get a great price for your property, you will have to fork out a great deal of money to buy a similar property. And if you want to buy a bigger or more upmarket property, it will cost you even more.
According to the Absa House Price Survey, due to a sharp increase in house prices and relatively stable interest rates over the course of last year, new mortgage bonds are increasing and, consequently, the monthly repayments on mortgage bonds are higher. Consumers are finding property less affordable and this has resulted in a drop-off in the growth of house prices since last November.
Your decision to stay put and upgrade your home, or sell and buy another house will depend largely on your circumstances and preferences, Jacques du Toit, a senior economist at Absa and the author of the Absa House Price Survey, says.
Before you make a decision, you should consider the following factors:
“We wanted a bedroom for each child, a study and a guest room which can double as a play room for the kids. It was definitely much cheaper for us to build on rather than buy a bigger property,” Karen says.
The Taberners bought their home five years ago for R345 000. With the recent renovations, they have spent about R585 000 in total.
“We have added quite a lot of value to our property now,” Karen says.
The couple did not seriously look around for other larger properties because they love their house and are happy living in Plumstead.
Judging by advertising leaflets and the property pages of the local newspaper, the Taberners noted that three- to four-bedroomed houses in their area were selling for R700 000 to R800 000.
A word of warning
When you make alterations or additions to your home, you are ploughing money into a lifestyle asset, leaving you with less money available to invest for retirement, Andrew Bradley, the chairman of the Financial Planning Institute, says. The purpose of your investment portfolio is to cater for your retirement needs.
From a financial planning point of view, your home is a lifestyle asset rather than an investment asset, Bradley says.
Every time you move to a new home, you are changing your lifestyle and if you are scaling up, your lifestyle costs may increase.
Scaling down can even cost you because properties in security complexes and retirement villages tend to be more expensive than ordinary properties.
Bradley says the danger of allocating too much of your financial resources towards your lifestyle needs is that you will have less available for investment, and therefore for your retirement requirements.
You may overspend on your home in order to live in a lovely home, but as a result of this, you may have to drop your standard of living in retirement.
Before you commit more money to your house, consider the effect it will have on your investments, and ultimately, on your lifestyle in retirement.
Add value to your home
Take the plunge
Swimming pools are regarded as a must-have by many property buyers, so a pool will definitely add value to your home and can enhance your quality of life. Dave Regester, the general manager of Pelican Pools, says a average residential pool will cost you between R32 000 and R48 000. The average pool ranges in size from about 4 metres by 3m to about 8m by 4m. The cost includes the materials, labour, electrical installation, a pool light, pump and filter, as well as about one metre of paving around the pool. The price will be influenced by whether you want a gunite or fibreglass pool. A gunite pool is considered more hard-wearing and will cost you R3 000 to R4 000 more than a fibreglass pool of a similar size. If you want a more elaborate swimming pool with heat pump and water feature, you could spend between R70 000 and R100 000 for the project.
Get out
South Africans are big on braaiing and entertaining outside. A good outdoor entertainment area will enhance the value and marketability of any home. Gareth van Heerden, a director of GVH Construction in Cape Town, says an outdoor entertainment area of about 30 square meters with a built-in braai and adjoining pergola will cost you between R10 000 and R20 000.
Add warmth
A decor trend that has taken South Africa by storm is wooden flooring. These floors range from do-it-yourself click-together laminate panels to veneer panels in exotic woods, such as maple or mahogany. You can bank on spending about R150 to R350 a square metre for laminate, and between R700 and R1 000 a square metre for a suspended wooden floor. Wooden floors are easy to keep clean and they look great, but they are noisier than other types of flooring.
Renovate your kitchen
There is no doubt that a fabulous kitchen can sell a house, but of all the renovations, a kitchen renovation is likely to be the most costly, especially if you are going to splash out on new appliances too.
Philip Kirby, the managing director of Easylife Kitchens – which has outlets in Gauteng, Mpumalanga and Cape Town – says in order not to overcapitalise, as a rule of thumb you should spend about five to eight percent of the value of your property on a kitchen renovation.
So, on a R1 million house, you can spend R50 000 to R80 000. This figure would include granite counter tops, but exclude appliances. Kirby says about 80 percent of the kitchens he installs cost between R30 000 and R80 000. The rest of his work consists of minor revamps of less than R10 000, as well as very upmarket new kitchens costing up to R250 000.
He says top-of-the-range kitchens from one of the exclusive kitchen companies can cost up to R400 000. There is a big range in the cost of fixtures in a kitchen, which affect the overall price. For instance, a double sink can cost from R400 to R3 000 and a mixer tap can cost from R400 to R5 000.
Also, bear in mind that many kitchen companies only install the kitchen cupboards and possibly some lighting. Their prices do not include the cost of plumbing, electrical work and tiling, which pushes up your costs considerably.
Revamp the bathroom
If your bathroom is looking a little worse for wear, new tiles and sanitaryware can breathe new life into the room. A bathroom renovation will set you back about R20 000, Van Heerden says. Good quality sanitaryware alone can make up R10 000 to R15 000 of the cost. Building a bathroom from scratch is likely to cost in the region of R30 000 to R40 000.
Add a bedroom
Adding a bedroom with a full bathroom can set you back between R200 000 and R220 000, assuming the bedroom is in a new wing (and you need to extend the roof, build new walls and put in windows), Van Heerden says.
The cost of selling and buying
What selling will cost you
Estate agent’s commission
If you use an estate agent to sell your home, you will have to pay commission to the agent. The commission is negotiable, but you can expect to pay about six or seven percent (excluding VAT) of the selling price of your property to the agent. So, if you sell for R900 000, and agree to pay commission of seven percent, it will cost you R71 820 (including 14 percent VAT).
Capital gains tax (CGT)
The first R1 million of a capital gain made on your primary residence is exempt from CGT, but if you have owned your property for many years, there’s a good chance you could make a profit of more than R1 million. If you do and you are on the top marginal tax rate of 40 percent, you can bank on paying the taxman an effective 10 percent of your profit over R1 million.
Electrical and beetle certificates
The seller of a property is usually obliged to give the buyer an electrical compliance certificate and to pay for the cost of any repairs to the electrical installation. The cost of the certificate may vary depending on the area and contractor, but you should set aside about R450 for the certificate alone. The cost of the repairs will depend on the extent of the repairs. Similarly, you will have to provide a certificate stating that your home is not infested by beetles.
Bond cancellation costs
If you are cancelling your bond within the first two years of taking it out, it is likely that your bank will charge you a cancellation fee. The fee can amount to one percent of the outstanding balance. Whenever you cancel a bond, your bank may require three months’ notice of your intention to cancel the bond. If you do not give notice, the bank may charge you interest for up to three months, depending on when you give the notice. Cancelling a bond with an outstanding value of R500 000 could cost you R18 700 in cancellation fees and notice interest. In addition, your bank’s attorneys will charge you a fee of about R900 to cancel your bond.
What buying will cost you
Transfer costs
The government levies a tax on property transactions called transfer duty. The tax is paid when you buy a property and it is transferred into your name.
When you buy vacant land, you will pay transfer duty on the value of the land only, but if you buy an existing home the transfer duty is based on the value of the land and the building.
Transfer duty is charged on a sliding scale depending on the price of the property – the more expensive it is, the higher the transfer duty. For individuals the scale is as follows:
Conveyancing fees
You have to pay the conveyancers (attorneys) who register the property in your name, as well as the conveyancers appointed by the bank to register a mortgage bond over your property.
The Law Society has recommended tariffs that conveyancers may charge to transfer a property into your name. The higher the purchase price of the property, the higher their fee. For example, on a property bought for R480 000, the fee will be R6 000 (excluding VAT). On a property of R1 million, the conveyancing fees amount to about R10 000 (excluding VAT). In addition, conveyancers charge about R250 (excluding VAT) for postage and sundry expenses they incur in registering the property in your name.
The Law Society has also recommended the tariffs that conveyancers may charge for registering bonds. The bond registration fee is based on a sliding scale from R1 800 on a R60 000 bond, to R14 000 for a R2 million bond.
For example, on a bond of R480 000, the fee will be R4 000 (excluding VAT). For a bond of R1 million, the fee amounts to about R7 000 (excluding VAT).
Bond registration attorneys typically also charge you for postage and sundry expenses amounting to around R250 (excluding VAT).
Deeds Office levies and fees
The Deeds Office is a government office that falls under the Department of Land Affairs. There are Deeds Offices throughout the country and they are responsible for the registration of ownership and other rights in immovable property.
The fees the Deeds Office charges to register the transfer of a property are based on a sliding scale depending on the purchase price of the property. The scale is as follows:
* Up to R80 000, the fee is R55;
* Between R80 001 and R150 000, the fee is R200;
* Between R150 001 and R300 000, the fee is R260;
* Between R300 001 and R500 000, it is R340;
* Between R500 001 and R1 million, it is R400;
* Between R1 000 001 and R2 million, it is R500;
* Between R2 000 001 and R3 million, it’s R650; and
* Between R3 000 001 and R5 million, it’s R800.
The Deeds Office fee for registering a mortgage bond also varies depending on the size of the bond being registered.
* Up to R150 000, you pay R200;
* Between R150 001 and R300 000, it costs R260;
* Between R300 001 and R500 000, it is R340;
* Between R500 001 and R1 million, it is R400;
* Between R1 000 001 and R2 million, it is R500;
* Between R2 000 001 and R3 million, it is R650;
* Between R3 000 001 and R5 million, it is R800; and
* For bonds over R5 million, the fee is R1 000.
Municipal rates and body corporate levies
Property cannot be transferred from one owner to another until the rates due to the local authority have been paid in full for the financial year. The seller is liable for rates only for the part of the year during which he/she occupies the property.
In addition to paying a pro rata proportion of the municipal rates for the year, the buyer will be charged for a rates clearance certificate. Local authorities charge a fee of about R30 to issue a rates clearance certificate.
If you are buying a sectional title unit, expect to pay your levy up to the end of the body corporate’s financial year, and to pay for a clearance certificate from the body corporate. This can cost between R400 and R800.
Bank charges
If you finance your new home with a home loan, you must make provision for the following bank charges:
The cost of hiring movers is high, especially if you take out insurance to cover damage to your goods during the move.
Setting up costs
There are numerous costs that you may face after moving into your new home, such as:
* Electrical connection costs (if you do not have a prepaid meter);
* Telephone connection costs;
* Curtains and blinds;
* Installation of a security system; and
* New furniture, if your new home is bigger than your old one or if your old furniture is not suitable.
Other costs
There may be other costs that you may face when buying a new property. For instance, if you move to a more upmarket area, you may have to pay higher rates. And if you have school-going children, you may have to pay higher school fees to send your children to schools in the area. These costs will have an impact on your monthly cashflow.
If you need advice buying or selling a property in Simon’s Town call SimonsTownRealty.Info today at 086 026 3333 or 082 870 2004. Johan Horak.
SimonsTownRealty: Sell, Buy A Simon’s Town Property? Phone Today 021-7864028 or 082 870 2004
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Tags: Before You Sell, Building cost, The rich
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