Real Estate Investor Magazine South Africa October 2013 | Page 8

ASK THE EXPERTS What Are The Costs? Meyer de Waal Oosthuizen & Co Meyer de Waal Attorneys www.oostco.co.za Q Kate Young Asks: Making The Right Investments Q Justin Clarke Private Property www.privateproperty.co.za Kenneth Mashungu Asks: Transferring Funds Q Andrew Rissik Sable FX www.sable-group.com Allistair Brooks Asks: As a young couple, my husband and I want to buy a house, but we want to know, aside from the actual cost of the house, what other fees should we expect to pay? Is residential property investment still a good option to invest in right now? And how do I ensure I make the right investment option? How can I avoid losing money if I own a property overseas with transfer charges and the falling rand value? I don’t want to pay high transfer charges and lose money. A A A Meyer de Waal Responds: The first cost will be paying for the house – consider to have a deposit available if the bank does not approve a 100% loan. If the bank only approves a 90% loan, you will have to come up with a cash deposit of 10%. Then you have to pay transfer attorney’s fees and their expenses, which will include VAT on the fees and deeds office fees plus transfer duty. If you buy from a property developer sometimes the VAT on the purchase price and all the transfer fees and expenses can be included in the price as the developer will pay for all the transfer costs and bond registration costs. If you take up a loan from a bank you will also have to pay the initiation fees of the bank to process the loan application, budget +/- R5 700.00 for this, sometimes it is absorbed in the home loan, or must be paid in advance. Then you will have to pay a fee and expenses, like deeds office fees and software licence fees, to the attorney that registers the bond. As the fees of the attorneys and transfer duty are determined on a sliding scale according to the value of the transaction, it is best suggested that you go to a website that calculates all these fees and minor expenses – like postage and petties – as well. We suggest go to http://www.avidfirefly.co.za/04671/ and do your own calculations. Justin Clarke Responds: No matter whose data you are looking at, property prices have been pretty much flat since the beginning of the financial crises in 2008. That is five years of very low growth. Low interest rates have been countered by lack of easy finance and high relative credit exposure that most families are exposed to. On the other hand supply has also been disrupted with developers only now starting to trickle back to work, so there has been very little new stock coming onto the market. Also most of the surplus stock of property sitting on the balance sheets of banks and developers has been absorbed into the market. On the demand side the economy has behaved really badly, but remember we have had GDP growth of around 3% compounding for the last five years and the new middle class has still been growing, putting enormous pressure on rentals. Add to that the latest data from estate agents and originators that new records are being broken in terms of volumes of new home loans granted and volumes of sales done and we see a very clear picture arising. If you are in the business of property investment or want to get going, it is almost too late. As American banking dynasty Baron Rothschild said, buy when “when there is blood in the streets”. Don’t wait for the crowd for affirmation because you will be too late. Andrew Rissik Responds: This question touches on a few areas of risk for any investor who has purchased an offshore rental property. There are two broad aspects to the investment, paying the price and receiving the return. Paying the price is either by cash or part cash and part mortgage bond. Typically the cash component will be coming from South Africa so it’s key to ensure that you get the best rate of exchange as well as the lowest fees for transfer. Furthermore the fund externalisation needs to be correctly reported to the authorities and maybe a tax clearance certificate will be required. Once the offshore property is owned, tenanted and generating cash flow, the net income could be kept offshore or brought back to SA (with a mortgage the monthly payment would be settled before any remaining income could be enjoyed). In respect of transfer charges/costs, banks are renowned for non-transparent pricing: there are fees, commissions and then of course the rate margin. Using an independent forex broker results in no fees and a more competitive exchange rate. Do you have a property question you would like answered by our experts? If so, post it on ASK THE EXPERTS on www.reimag.co.za or email [email protected] 6 October 2013 SA Real Estate Investor www.reimag.co.za