Selling a Property – Capital withholding tax – Non resident seller

NON-RESIDENT SELLERS OF IMMOVABLE PROPERTY

From 1 September 2007, a purchaser of immovable property (which has been disposed of in excess of R2 million) is obliged to withhold the amounts set out below from the purchase price payable, if the seller of the property is not resident in South Africa:

• 7.5% where the seller is a natural person(Previously it was 5%);
• 10% where the seller is a company; and
• 15% where the seller is a trust.

A non-resident seller of immovable property may be entitled to request that tax be withheld at a lower or even zero rate. The reasons why a sale would attract a lower rate of CGT will depend on the facts of the particular case, for example, the person may be fully exempt from CGT or in the case of an individual, have a low level of taxable income or have disposed of the property at a loss.

 Thanks to Fanus Jonck email tax@jonck.net +27 (0) 21 914 7454

 

What is reckless lending?

Michael Buxmann (PGDFP), a financial planner at Nedbank Wealth, responds:

Reckless lending applies to any individual who is experiencing financial trouble due to the practice of negligent lending from credit providers.

Let’s start of by looking at the law: The development of reckless lending can be identified by looking at three minimum requirements that credit providers need to adhere to before entering into a credit agreement with a consumer.

Firstly, the law states in the National Credit Act: “Prior to entering into a credit agreement with a consumer, the credit provider must conduct a detailed financial assessment on behalf of the client. Should the credit provider fail to conduct such assessment, any credit agreement entered into between the credit provider and the consumer is classified as reckless lending or reckless credit irrespective of what the outcome of the assessment might have been.”

A detailed financial assessment on the consumer’s monetary affairs is nothing else than an analysis of the consumer’s monthly income, expenses and obligation towards existing debt. The process will provide the credit provider with an up to date snapshot of the consumer’s disposable income and cater as a sustainability and affordability test.

It’s ultimately impossible for a credit provider to do sustainable business without examining whether a client will be able to service the monthly repayments (capital plus interest) over the term of the loan.

Secondly, the law states: “Should the credit provider conduct an assessment and conclude that the consumer does not understand the risk, cost and obligation created by the proposed credit agreement, but still enters into the credit agreement with the consumer, such credit agreement is classified as reckless lending or reckless credit.”

Each individual’s knowledge on financial products and services differ, it is therefore necessary that the product provider determines if the consumer understands the risk of taking on additional debt, consequently having less money available to support his/her lifestyle.

What’s the true cost of the credit agreement? These can consist of an initial fee, monthly service fee plus the interest and capital settlement in the form of monthly repayments (obligation).

For example:

Loan Amount: R250 000.00
Loan Term: 84 months
Interest Rate: 22.40%
Monthly Service Fee: R68.00
Initiation Fee: R1 197.00
Total Repayment: R505 270.00

(The above calculation is only for illustration purposes.)

Lastly, the law states: “Should the credit provider conduct an assessment and conclude that entering into the proposed credit agreement would cause the potential consumer to become over-indebted, but still enters into the credit agreement with the consumer, such credit agreement is classified as a reckless lending practice.

In conclusion, if a consumer cannot sustain his/her normal lifestyle after the monthly repayment of the credit agreement he/she will suffer a shortfall and become over-indebted.

Understanding the functioning of debt as well as the costs thereof on your current lifestyle is one of the most important things to think through before you enter into a credit agreement with a credit provider.

Disclaimer: Fin24 cannot be held liable for any investment decisions made based on the advice given by independent financial service providers. Under the ECT Act and to the fullest extent possible under the applicable law, Fin24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.

http://www.fin24.com/Money/Money-Clinic/Debt/what-is-reckless-lending-20170207

 

Average cost to build a new house up almost 7%

Feb 17 2017 18:56

The struggle to deliver affordable housing remains a challenge as the costs for a 50 sm home is +/- R 222 000.00 – and this is for the construction costs only – not considering the cost of the plot – read more in the article below –

Meyer de Waal

Article written by Carin Smith

Cape Town – The average building cost of new housing constructed in 2016 increased by 6.9% to an average of R6 614 per square metre compared with R6 185 per square metre in 2015, according to Jacques du Toit, property analyst at Absa Home Loans.

Average growth in building costs has been about 9% per annum in the past ten years compared with an average headline consumer price inflation rate of 6.3% per annum over the same period.

The average building cost and the year-on-year percentage change per square metre for houses smaller than 80m² was R4 436 (up by 14.7% from R3 869 in 2015); that of houses of 80m² or bigger was R6 683 (up by 4.7% from R6 383 in 2015); and that of flats and townhouses was R7 659 (up by 6.2% from R7 213 in 2015).

Residential building activity is expected to remain largely subdued in 2017, according to Du Toit.

He said this is against the background of the continued relatively low level of consumer and building confidence, as well as recent trends and the outlook for the economy and household finances.

“Levels of building activity in the SA market for new housing remained largely subdued in 2016, which were in line with trends since 2009 when the economy experienced recessionary conditions,” said Du Toit.

“The planning phase of new housing, as reflected by the number of building plans approved by local government institutions, showed some contraction last year compared with 2015. The construction phase of new housing – that is the volume of housing units reported as completed – recorded growth of much in line with that of 2015.”

READ: Building a house now costs 7.5% more

 

The number of new housing units which gained building plan approval was down by 6.4%, or 3 836 units, to 56 143 units in the 12 months up to December last year compared with a year ago. This came to only 54.7% of a total of 102 691 plans approved ten years ago in 2007.

According to Du Toit, the drop in building plans approved in 2016 was largely the result of a combined decline of 16.5%, or 6 550 units, to a total of 33 214 units in the two segments of new houses. However, the number of plans approved for new flats and townhouses increased by 13.4%, or 2 714 units, in the 12-month period.

The volume of new housing units built increased by 4.6%, or 1 820 units, to 41 489 units in 2016 from 39 666 units constructed in 2015. This improvement in the construction phase was mainly the result of growth of around 19%, or 2 198 more units built in the segment for flats and townhouses to a total of 13 691 units last year. The two segments of houses showed a combined decline of only 1.3%, or 375 units, to 27 798 units in 2016.

The real value of plans approved for new residential buildings increased by R289.8m, or 0.6%, to R50.72bn in 2016, with the real value of new residential buildings reported as completed increasing by R629.5m, or 2%, to R32.79bn last year. These real values are calculated at constant 2015 prices.

source

 

 

 

 

 

5 things first-time home buyers should know

Buying your own home can be a daunting prospect. Many of us have spent our lives renting, so when we decide to take the step up to owning property we often aren’t quite as prepared as we should be. With this in mind, we sat down with Meyer de Waal, owner of My Bond Fitness and a property conveyancing attorney and also an exhibitor at the upcoming Property Buyer Show in April, to figure out exactly what a first time home buyer should know before signing on the dotted line.

1. Become an Expert

The first thing many of us do before we buy a new mobile phone, TV or even a pair of running shoes is we research. We look up the product online, compare specs and read countless reviews before finally making our decision. You would think most of us would do that on the biggest purchase of our lives – a house. The thing is, we don’t.

Meyer suggests that not only should you research the housing market extensively, comparing properties in your desired locations, but also get a Comparative Markey Analysis (CMA) to compare the price you are being asked to pay with other prices in that neighbourhood. More often than not the estate agent involved will offer you a 1-piece brochure with information on the property – don’t be afraid to request more! Buying a house is a 20-year commitment and one that should not be entered into lightly! A good agent will assist with sales trends/comparison of apples with apples in the area using systems such as PropStats by the Institute of Estate Agents of South Africa (IEASA).

Lightstone, an exhibitor at the Property Buyer Show, provide buyers with a website where they are able to obtain a CMA on the property they are interested in. It is important to remember that property trends to fluctuate, so the CMA is just a guideline and not an accurate representation of the property market.

2. Check Your Credit Score

The major stumbling block in most property sales is financing, with only 1 in 4 home loans being approved. What many of us do not realise is the importance our Credit Score plays in this decision. Your credit score will determine the rating the bank and other financial institutions give you after examining how you have handled credit in the past. If you have a “thin” profile and little or no debt, it generally means you have little information the bank can analyse and you may find it strange that the bank may request that you first open a store account to establish a credit profile and then come back to them

If you are in the market for a new home, there are many online sites where you can personally check your credit score, this will help you to work out how much you could qualify for. By knowing your credit score, you have the chance to improve it over time. This could potentially save you up to 30% on your bond payments. It is always important to be cognisant of your future purchases and how these can affect your credit score. For a quick and free online check – go to www.mybondfitness.co.za or the Credit Bureau online.

3. Size Matters

After you have found out your credit score, you can check your affordability. This takes into account your income and expenses, working out the size of the loan you could potentially get from the bank. Knowing how much you could possibly borrow makes the entire process far simpler. “Most agents will show a client several houses before they decide on the one they really like,” Meyer explained. “After the potential owner has decided, the agent goes about running all the necessary checks, including their credit record and what they could possibly afford. By knowing exactly what you can afford before beginning your search you not only remove the risk of falling in love with a house you can’t afford but also improves the chance your agent can find you one you will like in your price range.”

4. Budget Before You Buy

As simple as this may sound it can truly save you in the long run. When thinking of buying a home take an honest look at your finances. Replace your monthly rent with the potential bond repayments, as well as costs like house insurance, rates and taxes, levies and property maintenance. All these costs add up and could put a strain on your monthly income.

Budgeting for other costs like the bond registration fee and transfer costs can also spiral out of control. Use something like Avid Firefly, an application that works out the possible costs involved in the purchase of your home.

There are also plenty of personal budget apps out there, like Mobile2Budget, which make controlling your finances so much simpler. Try one out for a few months to see exactly where your money is being spent!

Establish if you can qualify for a subsidy from the Government as a fist time home buyer under the FLISP initiative.

5. Working Hard For Your Money

Getting a home loan is a difficult business and can be made even more challenging depending on how you’re employed. A full-time employee with a constant pay cheque is a far more attractive prospect for any lending agent than someone who is self-employed or commission-based.

If you are self-employed or work for commission contact a home loan consultant before you consider buying. There might be some serious red tape you need to get around and the last thing you want to do is lose out on your dream home because of delays with your bond approval.

This article was also published in HomeTimes

Real Estate Investor Magazine

Property 24

 

 

We are changing the game to save you thousands!

MDW Inc. Attorneys www.mdwinc.co.za provides a unique, innovative and very cost effective service to private sellers from the beginning to the end of the process.

With the advancement of digital technology, the property game is now going digital and the entire process can be handled by MDW INC.
We assist private sellers to show their properties themselves – but we place it on the largest listing portal available.
Our focus remains “conveyancing” – the transfer of the property. We charge a nominal administration fee to list the property and the administration.

We generate our main income when the seller appoints us to attend to the conveyancing – [the purchaser pays for the transfer fees and costs]

MDW INC Property Listing Services includes:

• You act as private seller and save thousands of rand’s on agents commission

• We offer a listing of your property on the largest property web site Property 24. We pass on all the leads to you to show your

Property 24 only allows agents to list – we have a listing agreement. Property 24 has over 1 million viewers a month.

MDW INC Conveyancing service

• We provide you with a draft deed of sale to have available when you market the property We assist you to close the

• A market comparative analysis (CMA) to determine if your property is priced correctly

• Screening of all buyers – optional at your request. Bond pre-approved and credit worthy – our unique service www.mybondfitness.co.za

Our pre-qualification process received good media exposure – as recently featured in Home News click on the link to read the article “Is this the game changer for prequalifying buyers?”

• Home Loan origination, obtaining the best bond option for your buyer – or even yourself if you are to buy
• Related services: We arrange – Electrical, plumbing and Beetle inspections, which can paid on transfer.
• Other support- any repairs and renovations

If you would like more information or a consultant to contact you, please email –

Janine Grobler

Cell: 082 091 5678

Email: listings@mdwinc.co.za

 

No drop yet in housing demand

Private Property South Africa

Betterlife • Mar 23, 2016

In the financial year to end-February, the average price of homes on which new bonds were approved rose by 6,3% to just over R1m, according to the latest statistics from BetterLife Home Loans, SA’s biggest mortgage originator*.

These figures also show that over the same period, the average approved bond size was R811 000, and that 52% of borrowers in the past 12 months were able to pay a deposit of one-fifth of the purchase price – or more – when applying for their home loans.

“This is a far cry from the days when 100% or no-deposit loans were the norm,” says BetterLife Home Loans CEO Shaun Rademeyer, “and it is very much in line with our on-the-ground experience, which is that SA consumers have become much more informed about their finances in general, and are putting a lot more financial preparation into becoming homeowners than they did a few years ago.

“Many of those coming into the market as homebuyers now have in fact been saving carefully for two to three years to accumulate a sizeable deposit, because they are more aware of the benefits of doing so when it comes to qualifying for a loan, and also keeping monthly bond repayments down in the face of rising interest rates.”

As it is, he says, the monthly household income required to qualify for the average loan has risen less than 1% in the past 12 months, despite the 6,3% in house prices, largely because so many prospective borrowers have been able to put down bigger deposits.

“What is more, greater financial awareness and discipline as regards personal debt management and savings has facilitated sustained demand in the residential property sector over the past 12 months – and in the number of new home loan applications – even though there have been three interest rate increases in that time.

“We find that consumers who have planned well ahead for their home purchases won’t delay in the hope of the tide turning on interest rates or home prices. In addition to saving substantial deposits, they have usually also made provision for interest rate fluctuations by reducing their overall debt burdens, which is reflected in the fact that the percentage of outright declines on home loan applications submitted to the banks has actually dropped by more than 3 percentage points over the past 12 months.”

Meanwhile, Rademeyer says, first-time buyers who have usually been the first to exit the market when the financial going gets tough have been assisted to go ahead with their home purchasing plans over the past year by the fact that home prices in this sector grew by an average of just 2,3%.

“The average deposit required in the first-time buyer sector also fell, from an average 8,4% of the purchase price to 7% of the purchase price, and on top of that the very large majority of those home loans that were approved for 100% of the purchase price went to first-time buyers.”

This bodes well for the future of the market as buyers move up the property ladder, he says, as does the fact that the banks are still keen on new home loan business.

“However, prospective homebuyers need to know that credit criteria are being strictly applied, and that they have a better chance of being approved for a home loan if they apply through a reputable mortgage originator such as BetterLife Home Loans. Our success rate is 75%, as opposed to the general market approval rate of less than 40% at this stage.”

*The BetterLife Home Loans statistics represent 25% of all residential mortgage bonds being registered in the Deeds Office.

 

Slow service delivery in the Deeds Office to impact on economy. Is this our local “9/12”

When you plan a property transaction, one of the last things on your mind is the return of your title deed after the registration in the deeds office. This can cost a property owner thousands of rands.

Our experience is that the local deeds office is one of the worst performers when it comes to the delivery of the title deeds after registration. This slow/bad service may cost the economy and a property owner as a property owner must now wait months to get a title deed out of the deeds office – as example when the property was sold again, or if a further mortgage bond must be registered.

We also cannot understand why the Deeds Office is so much in arrears, when the rest of the country appears to be must faster in their service deliver, in particular when it comes to the delivery of a title deed.

This problem is compounded by the frustration experienced by conveyancing attorneys, estate agents and members of the public when the deeds office in Cape Town announced late in December 2015 that they will close their offices for almost 3 weeks for a Christmas break – the result that many property transactions, worth millions of rands, could not be registered.

From the Deeds Office

We can advise as follows:

• As at end January 2016 our backlog total stood at ±50000.
• The Image Scanning section commenced with an action plan on 1 February 2016 whereby a renewed attempt was made to get all the backlog deeds scanned.

During February we scanned 46116 deeds that were then ready for verification on 1 March.

I can report that for the period 1 – 10 March we verified 17000 deeds and delivered 13900 deeds. We want to advise conveyancers that we anticipate that we will be delivering the 46000 deeds within the next 3 – 4 weeks.

We are requesting the cooperation of conveyancers:

1. To collect deliveries daily as we do not have the space to store deliveries
2. To deal with requests for expedited deliveries cautiously and only in very urgent matters as the expedited requests places an extra burden on the section. If we stick to our action plan, we project that we should be able to deliver deeds registered up to end December 2015 by end March 2016.

Errors and omissions excepted (E&OE)

 

Buying a home ?- Do your homework first

Buying a property is one of the most daunting experiences you will ever go through. It does not matter if you are a first time home buyer – or it is your second or 3rd property. We deal with property transactions every day and that is why we decided to change the way property transactions are done. DO YOUR HOMEWORK BEFORE YOU BUY GET AN ACCURATE ESTIMATE OF THE HOME LOAN YOU OUGHT TO QUALIFY FOR – IT TAKES YOU LESS THAN 5 MINUTES We developed the best online process – all internet based and no forms to complete and/or days to wait before you get a result. If you are connected to the internet – you can do it! Go to www.mybondfitness.co.za If you want more information – contact Juanita admin@budgetfitness.co.za DO YOU QUALIFY FOR A GOVERNMENT SUBSIDY AS FIRST TIME HOME BUYER? Get more information from www.flisp.co.za For more information – send an email to Juanita – admin@budgetfitness.co.za GET THE BEST LEGAL TEAM BEHIND YOU – LET US CHECK OUT YOUR DEED OF SALE – BEFORE YOU SIGN IT [AVAILABLE FREE TO ALL EXISTING CLIENTS] This is what we do on a daily basis – get in touch for free assistance – contact: Meyer de Waal meyer@oostco.co.za or Mark Witzmann mark@oostco.co.za or Debbie Webber Debbie@oostco.co.za or Jaamonique Phillips legalassist@oostco.co.za

 

Rent2buy – Struggle to raise a bond?

Rent to buy feature in BusinessDay Homefront publication. The Rent2buy concept developed and fine-tuned by Meyer de Waal was recently featured in the BusinessDay Home Front publication. Strict lending criteria, as a result of increases in interest rates has led that the Rent2buy concept has proved to a solution for many to get their foot in the door to own their own home. A proud example is one of our latest home owners. He had a judgement against his name a year ago, the judgement was paid up, we secured a Rent2buy transaction for him when no bank wanted to give him a home loan and 9 months later his credit profile improved so well that he was granted a home loan. He took transfer in February 2016 and now a proud home owner. CLICK HERE to read the full BusinessDay article… Dispute Resolutions Course Just as Rent2buy is the new “buzz word” to secure your own home – resolving disputes through innovative and structured processes have matured into the solution so long needed. If you missed out on the first “Dispute Resolution” workshop hosted in March 2016 by the Professional Development Facility of Law, UCT, then do not miss out on the other courses hosted in 2016. Advocate Jacques Joubert, a long-time associate and a ADR accredited commercial mediator with more than 20 years of experience will be one of the co-presenters. CLICK HERE to read the full programme

 

Is it wise to pay a deposit when you invest in a property?

CAPE TOWN – In this advice column Tshireletso Rakgori from Alexander Forbes answers a question from a reader who wants to know if he should put down a deposit on an investment property he is buying or rather invest the capital elsewhere?

Q: I have R100 000 in my savings account. I’m currently buying an investment property and would like to use the money for deposit to get the monthly payments down. The banks offered me a 0.05% improvement if I make that deposit and the monthly repayments will then match the rental income.

My fiancé thinks I should rather take that money and invest it elsewhere where it can earn higher interest. What would you advise?

Paying a deposit towards a mortgage bond can make a significant difference. A mortgage is a major financial burden and reducing it can have immediate benefits.

Buying a house via a mortgage bond essentially entails making two kinds of payments. The first is to repay the capital amount, which is usually the purchase price of the house, and the second is to repay the interest that the bank charges over the period of the loan. During the first years of the mortgage bond, the largest part of your repayments goes towards paying the interest, making the reduction in the capital amount quite small.

How this works is that the deposit you pay upfront reduces the mortgage bond you owe. Therefore a smaller bond is required, which in turn reduces the amount of interest you pay.

To make the above more clear, consider the following:

Let’s say for example the property you are purchasing is R1 200 000. If you take out a bond with no deposit at a 10.25% interest rate, you will pay R11 779.72 per month over 20 years. At the end of the bond term, you will have paid back R2 827 132.95

On the other hand, if you could put down a R100 000 deposit, the monthly repayments will be R10 798.08, and the total repayment will be R2 591 538.54. If the deposit is added to this, the total still only comes to R2 691 538.54. In other words, you would save R135 594.41.

In paying the deposit you therefore not only get the benefit of having the expected rental income match the loan repayments, but you also get to save on some of the interest that the bank would have charged over the years. The other benefit is that the mortgage will be paying itself essentially from your rental income.

The benefit is therefore immediate and could help you to meet your cash flow needs in the short term. In the long term you would also benefit from the capital growth on the property. Being a primary human need, housing is always in demand and if you have chosen one in a good area, you should see growth in value at least linked to inflation.

Overall, property is a great investment, however if you are going to acquire it through a loan you want to do your best to minimise the loan as well as the term of the loan to save on interest. That way you can enjoy more years of earning rental income that will be coming into your pocket instead of it going towards loan repayments.

Tshireletso Rakgori is a financial planning consultant with Alexander Forbes in Johannesburg.

This article appeared in Moneweb