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Monthly Archives: October 2014

Rent to Own Programme in UK – How does it compare to Rent to Own in South Africa?

RENT-TO-BUY IN THE UK

– DEDICATED PROGRAMME TO HELP ASPIRING HOME BUYERS TO ACQUIRE THEIR OWN HOMES –
HOW DOES IT COMPARE WITH RENT2BUY IN SOUTH AFRICA?

We are proud that we developed the Rent2buy concept into a fine product in South Africa.

The three main criteria to raise a home loan remain the following:
• a good credit profile
• affordability to pay back the loan
• a deposit.

Lending institutions prefer the borrower to have a deposit available when they apply for a home loan. On average the banks require a 15% deposit towards the purchase of your home.

The focus of the Rent2buy program developed by Meyer de Waal is structured to assist the Rent2buy buyer to improve a credit profile, measure and test affordability and also save towards a deposit during the rent2buy period.

We look forward to the day when the South African Government or large corporations can be as innovative as the product launched the United Kingdom – where they have actually launched an initiative to assist aspiring first time home owners to pay rent below the market value, to enable them to save toward a deposit. For a copy – email meyer@irent2buy.co.za

Rent2buy received wide recognition in South Africa and we already have a structured manner in how to “save towards a deposit” with the Rent2buy concept.

The media cover includes:

• Private Property
• Real Estate Investor Magazine –
• Property 24 CLICK
• The Mortgage Magazine

email meyer@irent2buy.co.za to obtain the media articles or

To receive more information about the Rent2buy Concept and to view the F A Q Brochure or to buy or sell your own home on rent2buy – contact Meyer meyer@oostco.co.za

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Posted by on 24/10/2014 in Content

 

Reckless Lending

Reckless Lending – from Credit Health

In this edition of our Credit Health newsletter our intrepid attorneys provide insight on reckless lending and what it means to consumers as well as to Creditors.

Credit Providers are always looking at obtaining new clients via email, phone calls and website advertising. In some instances the sales person is more focused on their sales target rather than the consumer’s actual financial circumstances.

This becomes a dangerous position for both the consumer and the Credit Provider as it drives incorrect behaviour. For the consumer, access to credit is made easier as they are being given the cash up front and they are able to spend it in any way they deem fit. This cash, however, usually has a long payment term and has a high interest rate attached.

The situation is dangerous for the consumer because they may spend the money and may not be able to afford the repayments to the creditor in the long term.

For the Credit Provider the situation is dangerous because if it can be proven that they did not take reasonable steps to establish the credit worthiness of the consumer, “an application may be made to Court and the Court may declare the credit agreement reckless and set aside all or part of the consumer’s obligations under the agreement or alternatively suspend the force and effect of the agreement” says Natasha La Vita of Berndt and La Vita Incorporated.

This is a mouthful but what does it really mean to Consumers?

Audrey Berndt of Berndt and La Vita Inc. has indicated that when assessing your credit worthiness, a Credit Provider should have the following considerations top of mind:

1. Did the consumer have a general understanding and appreciation of the risks and costs of the proposed credit, as well as an understanding of their rights and obligations?
2. When doing assessments, did the Creditors perform an affordability assessment to verify that the lender can afford the loan or credit that they are applying for?

3. Would entering into the agreement leave the consumer over indebted?
4. If the consumer has a commercial purpose for obtaining credit then the Credit Provider must have a reasonable basis to believe that the purpose will prove successful.

If a Credit Provider did not take the necessary steps and efforts to correctly assess the above, then the Consumer may approach a court to have the agreement declared reckless and void. In other words the credit agreement is no longer enforceable.

Some tips: Berndt and La Vita Inc. have indicated that Consumers should consider the following when establishing if their credit agreements are reckless:

• Did the Creditor conduct a financial assessment of your obligations?

• Did the Creditor obtain a copy of your credit report?

• How was the credit sold to you? Special emphasis should be placed on telephonic sales.

• Could you at the time of obtaining credit afford the credit repayments?

• Were you under administration or debt review?

In conclusion, if a bank or other Credit Provider does not check on a Consumer’s credit history and carry out a proper financial assessment to determine how much credit a consumer can afford prior to granting credit, and in the event that the Consumer later defaults, the agreement can be declared reckless and the Credit Provider forced to write off part of or all of the amount advanced.

For any queries on the topic or any other legal matters, please feel free to contact Berndt and La Vita Attorneys at info@blvlaw.co.za for expert advice.

Also note that you can track if any unauthorised checks were done on your credit report by obtaining a credit report and reviewing the enquiries done on your profile. As Credit Health has the most comprehensive information in our 4 in 1 report, this would be a good place to start: http://www.credithealth.co.za.

 
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Posted by on 24/10/2014 in Content

 

Special Merit Award for the Mountain View Villas Project -Cape Town Community Housing Company (CTCHC)

Cape Town Community Housing (CTCHC) provided us with the first large volume of Rent2buy units to offer to the public.

This opportunity from CTCHC transformed the Rent2buy idea and concept into an actual reality – as for the first time we could offer the large numbers of people who are declined a home loan, but “almost there” to qualify – the opportunity to secure their homes, by first renting it and then within a period of 12 months, take the big step to buy it.

This week we celebrate with Cape Town Community Housing Company as they received a special award in recognition for providing an innovative approach to high density, well located and designed sectional title housing units for the affordable housing market.

Cape Town Community Housing Company (CTCHC) received a Special Merit Award for the Mountain View Villas Project and were commended on the standard of finishes and building materials used at the recent S A Housing Foundation International Conference held in Cape Town.

Meyer de Waal and Mark Witzmann has also been involved with the co-presentation of workshops for aspiring home buyers with CTCHC and the most recent workshop was held for the Department of Human Settlements.

 
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Posted by on 08/10/2014 in Content

 

House price indices 6 October 2014- ABSA

Year-on-year growth in the average nominal value of middle-segment homes in the South African residential property market was marginally lower in September this year compared with the preceding month. This came on the back of a declining trend in month-on-month price growth since January this year (see graph below), which was, as expected, eventually reflected in lower year-on-year price growth.
Real house price growth, i.e. after adjustment for the effect of consumer price inflation, remained relatively subdued in the first eight months of the year compared with the corresponding period last year, impacted by the fact that consumer price inflation averaged 6,2% year-on-year (y/y) in January to August. These price trends are according to the Absa house price indices, which are based on applications for mortgage finance received and approved by the bank in respect of middle-segment small, medium-sized and large homes (see explanatory notes).

The average nominal value of homes in each of the middle-segment categories was as follows in September 2014:

• Small homes (80m²-140m²): R820 000
• Medium-sized homes (141m²-220 m²): R1 166 000
• Large homes (221m²-400m²): R1 879 000

The following macroeconomic and household finance-related factors are impacting the residential property market and eventually house price trends:

• Low real economic growth of 0,6% quarter-on-quarter (q/q) in the second quarter of 2014, after a contraction of 0,6% q/q in the first quarter, with full-year growth of 1,5% expected.
• Low private sector formal employment growth up to the second quarter of the year.
• Upward pressure on consumer price inflation, averaging 6,2% y/y in January to August this year, and expected to remain above the 6% level until early 2015.
• An upward trend in interest rates, forecast to continue in 2015 to curb inflation, affecting the cost and affordability of and demand for credit, including mortgage finance.
• Declining growth in real household disposable income and consumption growth, which remains closely correlated on the back of a low level of household savings.
• A household debt ratio of 73,5% of disposable income, with the cost of servicing debt that has risen to almost 8% of disposable income on the back of higher interest rates.
• The number of credit-active consumers with impaired credit records increased to 9,95 million in the second quarter of 2014 (45% of a total 22,12 million), which affects banks’ risk appetite and lending criteria, and the accessibility of credit.
• Continued relatively low consumer confidence of -1 index points in the third quarter.
• Consumers remained mildly to very exposed in terms of their financial vulnerability in the second quarter of the year.

In view of abovementioned trends in and prospects for the economy and the household sector, as well as house price growth in the first nine months of the year, single-digit nominal price growth is forecast for the remainder of the year and in 2015, with real price growth that will be influenced by trends in consumer price inflation.

Explanatory notes:

The Absa house price indices, available back to 1966, are based on the total purchase price of houses in the 80m²-400m² size category, priced at R4 million or less in 2014 (including improvements), in respect of which mortgage loan applications were received and approved by Absa. Prices are seasonally adjusted and smoothed in an attempt to exclude the distorting effect of seasonal factors and outliers in the data. As a result, the most recent index values and price data may differ from previously
published figures.

The information in this publication is derived from sources which are regarded as accurate and reliable, is of a general nature only, does not constitute advice and may not be applicable to all circumstances. Detailed advice should be obtained in individual cases. No responsibility for any error, omission or loss sustained by any person acting or refraining from acting as a result of this publication is accepted by Absa Bank Limited and/or the authors of the material.

Compiled by
Jacques du Toit
Property Analyst
Absa Home Loans
45 Mooi Street
Johannesburg | 2001
PO Box 7735
Johannesburg | 2000
South Africa
Tel +27 (0)11 350 7246
jacques@absa.co.za
http://www.absa.co.za

 
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Posted by on 06/10/2014 in Content

 

Capital gains tax exemption on primary property

Capital gains tax exemption on primary property
Sep 26 2014 13:54 Fin24

A Fin24 user is not sure whether he qualifies for an exemption of capital gains tax on the sale of his property. He writes:

My wife and I bought a two bedroom townhouse in 2005 and stayed in it until 2008.

We decided to rent a three bedroom townhouse from 2008 after having kids.

My mother-in-law moved into the original property until such time as we could afford to buy a house with a granny flat, including the sale of the original property. This is now possible in 2014.

Do I qualify for the capital gains tax (CGT) primary residence exemption as the two bedroom townhouse is our only property?

Pieter Faber, technical executive: tax law & policy at the SA Institute of Tax Professionals (Sait), responds:

The primary residence exclusion is dealt with in paragraphs 44-51A of the Eighth Schedule to the Income Tax Act.

By definition the “primary residence” exclusion requires firstly, a natural person or trust to hold an “interest” in the property and secondly, that the person or his or her spouse ordinarily resides there and uses the residence mainly for domestic purposes.

An “interest” in property would include a real right of ownership (including co-ownership as in the current matter) and also the right of use as a lessee.

Where more than one natural person holds an interest, the exclusion must be apportioned in terms of each spouse’s pro rata interest.

For example, if the wife owns a 50% interest she would be entitled to only 50% of the primary residence exclusion.

The “primary residence” exclusion has two alternate monetary parts, namely disregarding firstly, the capital loss or gain where it is less than R2m or secondly, disregarding the gain where the total proceeds is less than R2m.

The former exclusion is based on the capital gain or capital loss, thus the proceeds less base cost.

The latter exclusion is only available where the person or his or her spouse was ordinarily resident in the property throughout the period – that is from October 1 2001 or a later date of acquisition – to date of sale and did not use any part of the property for carrying on a trade.

ALSO READ: Capital gains tax unpacked

In the current instance, only the first exclusion calculation can be used as the persons were not ordinarily resident in the residence throughout the ownership period.

They would then, in terms of paragraph 47 – if the mother paid no rent – or paragraph 49 if rent was paid, have to apportion the exclusion for the time period they were not so ordinarily resident at or leased the property.

Furthermore, the capital gain or loss to be disregarded must be calculated separately for the spouses for each spouse’s own tax liability.

We assume that the husband and wife each held a 50% in the property from 2005-2014.

During this period they were only ordinarily resided there for 33.33% – that is three out of nine years – of the full time period.

The primary residence exclusion of the capital gain or capital loss for each spouse in terms of paragraph 45(1)(a) would, therefore, be equal to R333 333.33 – that is R2m times 50% times 33.33%.

– Fin24

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.

 
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Posted by on 01/10/2014 in Content