However, says Harcourts Africa CEO Martin Schultheiss, proper planning can bring it closer, and one of the most important elements of that planning should be to pay off debts – including home loans – as early as possible.

“The Association for Savings and Investment (Asisa) calculated earlier this year that the average monthly pension in SA is less than R3000, and advised that people should keep working for as long as possible to preserve their capital instead of using it to fund their retirement.

“It also said consumers should use any spare cash while they were still earning to pay off debts and then invest more for retirement, even if this meant deferring their material aspirations for several years.

“And we would like to add that following this course will also enable homeowners to derive the most benefit from downsizing to a smaller property, which has become something of a staple in retirement planning.”

Schultheiss notes that the housing crash of 2008 and 2009 was particularly tough on the upper end of the market to which many 50 and 60-somethings had already graduated. “This narrowed the gap between the upper and middle markets and in many areas still means that smaller homes are now not all that much cheaper to buy.

“In addition, many homeowners borrowed heavily against the equity in their large properties during the last boom and increased their mortgage burdens, making it even more difficult for them to make a profit on trading down now.”

Nevertheless, he says, it still makes sense to downsize. “In fact we suggest that people make the move as soon as they become empty-nesters. Middle-aged homeowners spend between 20 and 50% of their incomes on housing costs and most can achieve considerable savings by moving to a smaller property that is cheaper to run and easier to maintain, even if their bond repayment is not that much lower than before.

“These savings can then be put towards paying off the property and other debt so that they are ‘free and clear’ when they do retire, and can enjoy a better quality of life in their later years.”

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So says Harcourts Africa CEO Martin Schultheiss, who suggests that the authorities also look at ways to directly subsidise the mortgage repayments on homes in the lower price ranges.

“One possibility,” he says, “ would be to divert some of the taxes specific to property ownership back into a subsidy scheme for first-time buyers below a certain threshold. These taxes include the transfer duty payable on the purchase of properties costing more than R500,000, the capital gains tax payable on some property sales and even the municipal property rates payable by all homeowners.”

Estimates of the national average house price, he notes, currently range from around R550,000 to almost R800,000, “and to buy even at the bottom end of this bracket, prospective homeowners would be contemplating a monthly bond repayment of R4800, assuming they could raise a 10% deposit to start with.

“Now the mortgage guarantee scheme makes it easier for people who can afford that amount to get home loans, but it does not address the twin problems of lack of affordability and lack of stock in the lower price ranges.”

However both problems could be alleviated, says Schultheiss, by introducing a mortgage subsidy scheme that would bring more people into the affordability net, and stipulating that it only applies to newly-built homes.

“This would stimulate the private sector development in the affordable housing bracket that the government is trying to encourage, and have the added benefit of boosting employment because construction as labour-intensive.”

As an added safeguard against misuse, he says, buyers on the subsidy scheme could be restricted from selling their properties for five years, after which they would be free to upgrade – “and most probably start ‘giving back’ to the subsidy scheme by themselves paying transfer tax on a more expensive property.”

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That’s the word from RentalsDOTcom, the rental property management division of Harcourts Africa, which notes that the average electricity is price in most areas has now risen from around 33c/kWh to 41,5c/kWh.

“But on the other hand,” says CEO Martin Schultheiss, “the tariff hikes are going to make it more difficult for many people to qualify for home loans because the banks take household expenditure into account when evaluating affordability. This means they will have to stay in rental accommodation, which is positive for landlords from the demand perspective.”

The national energy regulator (Nersa) gave Eskom the go-ahead in February to raise its tariffs by 25% from 1 April and in most municipalities this is now being passed on to electricity consumers, adding considerably to their household bills.

“However, to ease the burden, many householders are already looking seriously at alternative energy sources and we would like to suggest that landlords should consider doing the same for their rental properties in order to protect their investments.

“Where possible, they should look at installing solar geysers, gas stoves and other energy and cost-saving equipment to help tenants keep their electricity bills down.

“Although this will involve some capital outlay, we believe this will be easily recovered over the next couple of years because tenant demand for rental units with ‘green’ energy facilities is going to rise steeply.”

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Commenting on FNB predictions that house price growth is likely to slow to single digits later this year, Martin Schultheiss, CEO of the Harcourts Africa property group, says it is clear that lack of affordability is currently a major obstacle to sustained demand in the housing sector.

“And without growing demand, price growth will decline,” he says. “Ours is a market where the greatest need is in the essential buying category, that is, people need an affordable roof over their heads, as opposed to leisure or speculative buying.

“And it is not only essential that greater volumes of affordable units are brought to market for prospective owner-buyers, but also for the affordable rental market, where better stock levels will spur greater investment.”

He says the household sector remains under pressure, with the latest figures showing the ratio of debt to disposable income still at nearly 80%. And while this paints a rather bleak picture for prospective homeowners, especially at the lowest end of the market, it also means that they will be looking for affordable rental homes if they cannot muster the finances to buy their own.

“Developers would do well to take note of this need and adapt development plans to cater for this sector. Although affordability is a common denominator, property investors are also looking for additional features – and developers who want to tap into this market should take heed.

“For instance, investors want compact properties with easy access and hard-wearing surfaces for easy maintenance. Tenants typically occupy units for an average of two years and landlords are keen to keep refurbishment costs to a minimum at the end of a lease period. Therefore, tiled floors are preferred to carpets, for example.

“Investors may also show a preference for built-in appliances and other facilities, such as pre-paid meters for electricity. And of course affordable units with low maintenance requirements would find favour among owner-buyers too.”

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The options need careful consideration, says Martin Schultheiss, CEO of the Harcourts Africa property group. “The benefit of selling is that you make a clean break, while renting out your property means that you will have a home to come back to when the contract period is up – and that hopefully that home will have appreciated in value in the interim.”

For homeowners with a large bond outstanding on the property, however, selling is arguably a better option, he says. “The costs associated with a rental property can swallow a large portion of the rental income, leaving the owner to make up the difference between real rental income and the costs of servicing the bond. And that can be onerous if he still has to pay his own rent – or service a bond on another property – in his new location.

“Costs that landlords have to pay include municipal rates, advertising costs to find a suitable tenant, regular maintenance costs, comprehensive insurance and management fees of about 10% of the monthly rental if an agency is appointed to manage the property on their behalf. It is also prudent to take into account unplanned vacancy contingencies and to set aside enough money to cover all costs while finding a new tenant.”

However, in instances where the outstanding bond on the property is small, the picture looks very different. “In such cases, owners can confidently expect that rental income will cover the costs and contribute to their own living costs. And they may benefit from capital growth during their absence,” Schultheiss adds.

But owners who do decide to rent out their properties are advised to choose managing agents with care. Agents should have a solid track record in property management, says Schultheiss, and should be able to ensure the home is properly maintained in order to protect its value. “They should also be able to advise on realistic rental levels and be able to vet prospective tenants properly  for creditworthiness and reliability.”

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They understand, says Martin Schultheiss, CEO of the Harcourts Africa property group, that exterior appeal is crucial to whet prospective buyers’ appetite. Homes that look tired and unkempt from the street will likely attract only the most intrepid bargain hunters, he says.

“However once sellers have spruced up the garden and exterior of the house the next big hurdle is the entrance.

“It sets the tone for the rest of the house – and while it would be a rare buyer who decides to buy a house on the spot because he likes the entrance, it unfortunately is much more common for uninspiring entrances to squash buyers’ enthusiasm.”

With space at a premium in most apartments, townhouses and even family homes, most sellers don’t of course have grand foyers to work with, but by keeping a few basic guidelines in mind they can make the best of what they do have and create a stylish and welcoming entrance to their homes, he says.

Tips for making the most of small entrances include:
* Keeping it simple. Clutter or sumptuous decorating can make a small space look even more cramped. Pack away personal belongings and the odds and ends that invariably land near the front door, such as bunches of keys, post, schoolbags and shoes, and try to create clean, elegant lines. A small table with fresh flowers in a glass vase or a single piece of sculpture may be all that is required in small spaces.

* Keeping it bright. Light paint on the walls reflects available light and can create an airy atmosphere. Light shades of a “warm’ colour, such as a soft yellow, can create a cheerful yet welcoming ambience.

* Using a well-placed mirror to visually create more ‘space’ and to reflect more light. If an entrance is really dark – and the seller’s budget allows it – a basic tubular skylight will make a dramatic difference by bathing the room in natural light.

Larger entrances naturally offer more scope for decorating but, says Schultheiss, the same basic principles apply. “What is important is that decorating and furnishings are kept to scale – and that the theme seamlessly blends with the rest of the house.”

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Recent Absa statistics show that house prices are now about 15% higher than a year ago, with the average house price now R1m.

“That places the ‘average’ house out of reach of many, if not most, first-time home buyers, says Martin Schultheiss, CEO of the Harcourts Africa property group. “At current rates, home owners will have to pay about R9 500 a month to service the bond on a property of R1m over 20 years – and that’s on top of their other monthly expenses that are taken into account in terms of the National Credit Act before a bank will grant a bond.

“However, all is not lost for young buyers who wish to own their own homes. Smaller properties, such as apartments or townhouses, offer a first foothold in the market and allow young buyers to start building equity.”

He cautions nonetheless that there are additional factors to consider before buying into group housing schemes. “The first is that although buyers will own their homes, they will share ownership of common areas and will be jointly responsible for the upkeep and maintenance of these areas, which are funded by monthly levies.

“Ownership in schemes is arguably also slightly more complicated than owning free-hold property where owners have sole discretion in matters such as renovations, additions and even whether or not to keep pets. Such matters in a shared scheme are regulated by rules that have to be adhered to by owners,” he says.

He advises prospective buyers to familiarise themselves with the applicable management rules before committing themselves and to establish how much monthly levies are and what they cover.

“Buyers are also advised to carefully assess the ratio of owners to tenants living in a particular scheme. Owners who occupy their own units tend to insist on high maintenance standards and are more likely to regularly pay their levies. This makes for better financial planning and limits the chances of unforeseen expenses and the necessity of additional once-off levies.

“Lastly, buyers should remember that size does count. A small studio may be cheaper and thus more affordable, but a two-bedroom unit may prove easier to sell once the owner himself is ready and financially able to upgrade to a bigger property.”

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Most buyers are willing to overlook small defects, says Martin Schultheiss, CEO of the property group Harcourts Africa. But, he cautions, obvious defects that will need expensive repairs will also be for the buyer’s account, unless rectifying them is made a condition of sale. Such conditions should be clearly specified in the sale agreement.

Another approach may be to use defects as a basis for some serious bargaining and the transaction may be worthwhile if the seller is prepared to discount his price by the amount that the repairs will cost. Buyers who go this route, though, are advised to seek the help of an expert to get accurate quotes for the necessary repairs.

The worst approach, Schultheiss says, is to sign the deal, take occupation before transfer and then try to deduct the expenses of fixing defects from the occupational rent specified in the sale agreement.

“The only circumstances in which a buyer is legally justified to deduct an amount from his occupational rent is when the seller refuses to rectify or to pay for specific repairs that were set down as a condition of sale.

“While conditions in the sale agreement do give the buyer legal recourse in cases where the seller neglects his duties, buyers will save much time, frustration and possibly money by rather asking for a discount to the value of the needed repairs upfront. We certainly advise our clients to go this route and to limit possible complications in all their property transactions.”

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That’s the word from Martin Schultheiss, CEO of property group Harcourts Africa, who says: “Many young couples buy starter homes that are easy to maintain such as sectional title apartments, but find themselves needing more space as their families grow. And deciding where to buy a family home needs careful consideration because families need different amenities from carefree young couples.”

The first consideration, he says, is whether the buyer plans to gradually upgrade as the family’s needs grow, or whether the family will buy a home that they can ‘grow into’.

“A slightly bigger home may be suitable while children are young but may become cramped with further additions to the family or when children reach their teenage years. While a more modest upgrade will be less expensive than a rambling family home, buyers must keep in mind that each move to another house will bring its own additional expenses such as transfer duty, bond registration and agent’s commission as well as relocation, and possibly renovation, costs.

“The benefits of taking the longer term view also include stability, since the family will not be uprooted each time the current property becomes too cramped. The immediate financial implications, however, are that a large properties will probably be more expensive, while maintenance costs of a large home and garden may also be higher.”

But irrespective of the approach, certain basic principles remain valid, says Schultheiss. Buyers should make sure that the area they choose is suitable, safe and offers as many of the amenities family members may need as possible. The need for suitable schools is probably an overriding factor, but accessible sporting and cultural amenities and parks will also go a long way towards creating happy childhood memories.

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“Sellers expect estate agents to protect their rights as a matter of course,” says Martin Schultheiss, CEO of Harcourts Africa, “but they should keep in mind that agents are honour-bound to also make sure that buyers’ interests are served.

“Buyers have a right to make sure that their property investment will be protected, and the only way they can determine this is if they have access to pertinent information, such as the reasons why the property is being sold,” he says.

“Reasons for selling property are mostly straightforward and can include the seller relocating to take up a job offer in another town or country, or retirees downscaling to more suitable property.

“Conflicts between buyers’ and sellers’ interest, however, arise when the reason for selling is that the seller wants to get out because of current problems in the area or because of planned developments that are likely to change the character of the area or impact on property values.

“Such information should be disclosed to potential buyers. Not doing so otherwise would, at the very least, constitute dishonesty,” says Schultheiss.

Agents, he says, should keep in mind that buyers are required to prove their bona fides by satisfying sellers that they are able to afford the property or that they can obtain the necessary finance from a bank.

“By the same standard, agents should advise sellers to disclose the reason for selling,” he says.

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