How to pay off your home loan faster

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Does the thought of twenty or thirty years of home loan repayments put you off buying a home? Even your dream home can start to look less dreamy when you’re faced with what looks like a life sentence of hefty monthly repayments. But what if there was a way to reduce this period … and reduce the total amount?

Buying a home is one the biggest financial investments most of us will make, yet how many of us are aware that small additional payments on your home loan can have a major impact on the final amount you will end up paying for your home? The biggest burden facing homeowners with a bond is the interest they will pay over a 20 or 30 year period.

Say you take a R1 million home loan over 20 years, no deposit and at the current prime lending rate of 9.5%;  you will end up paying R2 237 115 for your home. That’s enough to give anyone grey hair! But, before you lose heart, there are a number of steps you can take to pay your bond off faster … and significantly reduce that final figure!

Take a look at these 5 clever ways to bring down your home loan repayments:

Pay your salary into your Bond

I know it might sound strange, but as long as you have an access account enabled on your bond you can actually pay your salary into your home loan every month and then simply transfer out money needed for debit orders and day to day spending when you need it.

Here are the advantages of doing this:

– Benefit from lower interest rates applicable to the outstanding amount on your home loan
– Inadvertently use your home loan account as a savings account and pay off your home loan faster

Make Additional Payments

Fast track the repayment of your home loan by putting any surplus cash, like your bonus cheque or SARS refund, you have into your bond. Yes, this does require discipline and a measure of sacrifice but the long-term gain on your home loan is well worth it. Take for example, an additional R1200 paid towards your R1 million home loan every month, over and above the monthly instalment (R9 321 in this case) owed, and you’re looking at saving R374 344 in interest … and cutting your repayment period down to 14.75 years.

 Put Down a Deposit

If you are still in the planning phase of purchasing a home, consider putting down a deposit rather than taking a 100% bond. The bigger the deposit you’re able to put down, the smaller your home loan and the less interest you will pay. On a R1 million home, a deposit of R120 000 will reduce the interest you owe on the outstanding capital to R1 088 661. That is a straight up saving of R268 454 before you’ve even considered taking any of the additional actions discussed above. Calculate how much a deposit can save you, by viewing our Bond Repayment Calculator.

Ignore Rate Fluctuations

While you have no choice but to make increased monthly instalments should the prime lending rate increase, heaven forbid, it is a wise choice to keep your instalments steady in the event the rate decreases as this gives you an automatic gain on your bond. You’re already committed to paying a certain instalment so sticking to this amount should the rate drop gives you an added advantage in paying off your home loan that much faster.

Explore Your Home Loan Options

It doesn’t hurt to explore your options in order to secure an even better rate on your bond. Talk to a bond originator like Homeloan Junction. If you have a good repayment track record and credit history, who knows, they may just be able to negotiate a reduced interest rate. Even a 0.5% reduction can represent a significant saving; that is R77 773 saved on a R1 million bond over 20 years with no deposit down. Should you decide to switch home loan providers, be sure that the cancellation and penalty fees you’ll inevitably be charged will not outweigh your prospective savings.

As you can see, a little commitment and discipline can go a long way to alleviating the burden of your bond. And at the end of the day, paying off your bond faster and reducing the amount of interest you owe on your home loan translates to money in your pocket. This can be used towards your retirement, your children’s university fees, a world cruise or perhaps an investment property.

Yours in Property

Vincent

Positive growth in South African house prices

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After all the hedgehog and fox analogies, it’s time to head back to some economics.

We are all aware of the devaluation of the Chinese currency by now but, if the market is anything to go by, the effect has been almost brushed off. I sense that the American decision to retain interest rates has probably had something to do with that as the Chinese story is certainly not a good one just yet. Stories of vacant buildings in Shangai still abound, anecdotally or not. As regards the Fed’s decision, the States seem to be waiting for a rise in interest rates to signal that their economy has fully turned the corner and is on, hopefully, a sustainable Up. Sadly, a rising interest rate in the USA will not be good for the Rand as money which has been invested in emerging markets could flow back to the safe-house of USA interest-bearing deposits. Certainly, other countries in BRICS are also having a torrid time as are the oil producers. Nigeria is now facing their worst recession caused by extraneous factors, namely, the sustained collapse of the oil price.

So we have a recovering JSE, a weak Rand, poor GDP growth numbers and “headwinds” from China which result in collapsed commodity prices. Thank goodness for the reduction in the oil price and global inflation which still seems to be holding low or at very low numbers.

Against this backdrop, house prices are holding their own. FNB’s Valuers’ Index makes interesting reading. They sense that stock remains the primary reason for house prices being firm against last year’s numbers. Their Valuers’ Market Strength Index has grown in September 2015 to 51.32 and remains above the base level of 50. This measure implies that market strength is growing sustainably but what is more interesting is that the Valuers see the supply shortage remaining in the medium-term. To FNB, that is above expectation. From my viewpoint, I cannot disagree with them as many of the indices and articles talk to really tough times for Consumers.

However, the good news continues as both ABSA and FNB note that nominal house prices continue to rise. According to FNB, for the 1st 9 months of 2015, the average year-on-year house price inflation was 5.7%. That is a slower rate of increase in prices than the 7.1% for 2014. The point is that it remains a positive real rate of growth in the FNB methodology that uses a fixed weight house price index. Similarly, the ABSA nominal and real house price indices project at around 6% and 1.3% for 2015. Both banks project downward pressure and resultant negative house price growth next year with inflation projected to rise from 4.7% this year to about 5.8% next year.

The FNB article, 23 September 2015, puts a rather interesting spin on homeowners’ financial stress. Their sense is that there is less pressure on homeowners, as measured by the tendency in tougher times to downscale, because of the Banks’ stricter criteria for lending since 2008. In fact, the Household Debt-to-Disposable Income ratio has declined by almost 13% from 88.8% in 2008 to 77.4% by 2nd Quarter 2015. That is really significant. Corroborating with another financial market with which I am close, such a decline can certainly be attributed to the good work of the National Credit Regulator [NCR] who has been fastidious in demanding responsible lending. Their primary instrument has been the Income Affordability ratio used for credit scoring models. Lower debt levels across the board of LSM segments is good for South Africa.

I guess the question now is: How do I respond as an Originator or Estate Agent to these facts? We have repeatedly said that hard work wins. An attitude of never-say-die listing and selling and excellent relationships between successful people has a way of pulling through tough times. Homeloan Junction stands by to be the Originator of Choice for your homeloan financing.

Yours in Property.

5 tips to selling your home fast!

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When selling your home fast is your top priority, it pays to get tips from the experts.

There’s nothing more frustrating than wanting to sell your home in a hurry, and not being able to.  It could be that you want to move to another part of South Africa to start a new job or improve your career prospects, or maybe you want to be nearer to a family member? It could even be that you’re moving abroad, but if you can’t sell your home, it might feel like your dreams are drifting away.

A home buyer’s journey can be an exciting adventure, starting by getting yourself prequalified for a homeloan to searching for a property. You don’t want the challenge of selling your home to ruin your chances of buying the perfect property, so how do you make it happen?

How can you get your home sold, and fast?

Life moves at a giddy pace, and spending months waiting to sell your place so that you can move on, can seem like torture. And what if, in that time, your dream home is snapped up by someone else?

Homeloan Junction’s tips take the headache out of home selling.  Not only can you rely on our national team to prequalify you for a homeloan for your new property, you can start your house hunt right away, knowing that you are doing the right things to get your current property sold fast.

Here are 5 tips on how to quickly sell your home and make the most of a homeloan to buy a new and better property.

Price To Sell

To sell your home fast, you’ll need to price it competitively.  Take the time to do your homework. Look at similar properties in your area: how much are they going for, which price range is selling quickly and which is remaining on the books? Use this as a guide to pricing your own home, but don’t be afraid to take advice from the professionals.

Use The Power Of The Internet

Busy South Africans, especially those serious about buying property quickly are avoiding time-consuming personal property viewings. The trend is to take virtual tours of properties that are advertised online. Take advantage of this trend, and advertise your property online with photos and a video tour.  Without the inconvenience of a show day, you will be reaching serious buyers actively searching for a property just like yours.

Make First Impressions Count

In today’s competitive housing market, South African buyers are quick to compare properties. To sell your home quickly, you’ll need to take a fresh look at it. Does your home deliver? If you’ve lived there a long time it can be easy to become blind to what it actually looks like.

Someone looking at it for the first time is likely to notice the flaws that you no longer see – like the half-painted wall in the bathroom or the marks on the carpet in the lounge.

Walk around your home and take a good look at it. Is the driveway weed-free? Are the bathrooms fresh and clean?

Put yourself in a buyer’s shoes, and ask yourself what could be improved. You only get one chance to make a first impression, so make sure that your property looks inviting.

Get Help From The Experts

When it comes to selling your property in a hurry, a professional estate agent can be your best friend. They can help you simplify the process that comes with buying and selling property. Just how do you find a great estate agent? One way is to talk to your bond originator, as not only do they provide homeloans, they also have long standing relationships with estate agents, and are able to recommend agents that have a great track record.

 Get Prequalified for a Homeloan

The South African economy is starting to rise again from the dip caused by the global economic slump, that’s good news for our country’s housing market. Nevertheless, some people find it hard to get the funds they need in order to buy a new home. That’s where the services of a bond originator such as Homeloan Junction can prove invaluable, let us give you buying power by prequalifying you for a homeloan.

How did you fall in love with your home? Was it quite by accident, or have you been looking for  some time? The trouble is, once you’ve found the home you really, truly want … how will you sell the one you already own? By following these 5 simple, yet effective, tips you can be in your new ideal home quicker than you imagined possible.

Yours in property

Vincent

IT’S TIME TO BE A FOX ( Part 2)

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Our previous blog ” It’s time to be a fox” looked at the concept of hedgehogs and foxes. In this blog, we suggest some assertive behavior for the next period of our economic cycle.

But firstly, let’s reiterate. Hedgehogs

  • know one big thing
  • see the world through a filter of one big idea
  • stretch the idea and build data around it
  • are confident to predict and make many of them
  • drum on about the “tried and tested” formula
  • love complexity
  • are better in stable environments.

Foxes:

  • know many things
  • gather information from a wide spectrum of inspiration and sources
  • are self-critical and update their beliefs when faced with contrary information
  • are cautious about predictions
  • look for a new idea if something is not working
  • drive out with simplicity
  • are better in rapidly changing environments.

With that reminder, we are approaching rapids in our economy. That may sound like “one big idea” but it certainly is the consensus view of many writers at the moment. Just reading JP Landman’s article, Coming to a Standstill, dated 9 September 2015, he states that electricity and strikes initiated the SA growth problem, but these factors have been exacerbated by lack of confidence, a growing chasm between the public and private sectors, and a incoordination in key growth sectors. The SARB has also revised growth predictions and raised interest rates right into the headwind of a deteriorating economy in order to deal inflation. Not pretty at the moment, I’m afraid.

So what should you be, a fox or a hedgehog? We’ve been there before and survived, is a real hedgehog statement. You should’ve been around in 2008 to 2010, is another. Alles sal regkom, is a grand old hedgehog statement, loaded with stoicism and sense of duty. May I put to you that there is another way and explore the alternative.

The Foxy thing to do is to

  1. Review your business Good times layer in costs and make income assumptions. As for costs, scan every cost in your business and eradicate what even smells of complacency. As a radical move, you may wish to signal this effort to your people – stop the cake on Friday, change the coffee brand; just do something that makes everyone aware that times have changed.
  2. Review your activities – Golf on Wednesdays is really cool but stopping it will give you 6 good hours of extra work. And the message for your people will go without saying – news will get around. Start every day with a 2-Do List. Know what is optional and what must be achieved today, without exception. Follow-up on outstanding payments – years in business have taught me that “your best client [read, friend] will always pay you” probably means he is battling to pay. The other poor souls have already passed that point and you need to be the one creditor who collects. In property, chase up registrations and outstanding mandates. Remember management control is: Setting standards, Measurement, Evaluation, Correction or Reward and a Feedback Loop. Nothing short of that journey, is Control. Don’t delegate control if you’re accountable – by the time “your bank account tells you” it could be too late.
  3. Accept a Lower Standard of Living but not a Lowering of Standards: You can be poor but you don’t have to be dirty. Values drive behaviour and the values in your firm can leave space for facing the negative reality in the bad times, but not for excuses. You cannot create motivation but you certainly can channel it. Don’t allow your people to become de-motivated. There is a process of excellence in the business that needs to be maintained; maintain it. Customers certainly don’t need to know if you’re responsibly dealing with lowered economic growth. Stand up when answering the phone, convey positivity in your voice and your eyes, remain solutions-orientated and think possibility – there is nothing like sticking your chest out and tilting your chin upwards to make bad vibes go away. Remember your brain doesn’t know if you’re imagining or telling the truth when you decide to be positive in the face of circumstances. Imagination rules your world.
  4. Hunt for business: I have sat in airports recently reading the newspaper. I have even read the latest RW Johnson book and I am convinced that the day you believe it’s over, it is. Hunt for business. If you don’t someone else will. Jack Welsh had a famous saying: “Take control of your life, or somebody else will.” How true! No excuses, just down-to-earth action. No half-jobs, just hard work. If you want to read the paper and believe that China is your road to success, then go and work somewhere else. Remember this, people don’t leave you when they leave; they leave you in their heads a long time before that. You wish they would leave when they “opt-out” because that would save you money. The problem is they leave after months of “trying”, hours of toxic conversation with others, and a couple of unhappy customers. Watch for it in the daily activities and attitudes. Root it out asap. On the other hand, where genuine efforts are made by those great people who are with you for the long-run, encourage them and build them up. Remind them that “this too will pass” and that Action Conquers Fear.
  5. Find Inspiration: Running a business is tiring and battling cashflow, exhausting. Find a friend, a confidante, to whom you can turn. Pray, read, take “me time”, breathe deeply – 10 out, 10 in – to relax and replenish your soul. You can only give what you have, and be who you are. It is fair to say that your people “don’t need their leader with sweat on their brow.”
  6. Change BEFORE it hurts: It is always written about for one simple reason, people change WHEN it hurts. It is so difficult to simulate adversity in a successful company. It feels treasonous to even speak about the need to alter course when the island of delight is right on course. But, change you must. Bill Gates puts it this way:

When your business is healthy, it is difficult to behave as if you are in a crisis. That is why one of the toughest parts of managing, especially in a high-tech business, is to recognise the need for change and make it while you still have a chance.

Lots more could be said on this subject. Truth is that this is not the only recession we have faced and we have come through. Whether or not there is fundamental difficulty in this one, remains to be seen. Chance is there is little you can do to change that. But for foxes, they take inspiration from many sources, they re-consider the tried-and-tested, they try-abandon-try until their possibility thinking becomes their reality and their “new normal” meets their definition of excellence despite changed circumstances. They encourage others. They trade in hope and they are merchants of good news, truthfully spoken. Their word is their bond and their people trust them.

Hedgehogs have a place as well. They may be the very calm in the storm your company needs right now. Their idea may be good despite not ever pretending to be the silver bullet. Like all people, make allowances for them to enrich your team.

Yours in Property.

It’s time to be a Fox

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Howzit China! will certainly be on our lips after the global markets slumped this week in response to the yuan decline and other economic news. Our real good news is that some experts are questioning our SARB decision to raise interest rates in the face of a deteriorating market for consumers.

So it is time to pick ourselves up, improve our game and focus our efforts. It’s time to be a Fox.

I first heard the concept from Clem Suntner when I read his book Hedgehogs and Foxes. The article below is copied from Business Day and was written by Michel Pireu on 18 August 2015. All credit to him therefor for the first part of this blog.

In 1953 the philosopher Isaiah Berlin divided thinkers into two categories – the hedgehog and the fox – borrowing from Greek philosopher Archilochus who said, “The fox knows many things, but the hedgehog knows one big thing.” Hedgehogs, argued Berlin, see the world through the prism of a single overriding idea, whereas foxes dart hither and thither, gathering inspiration from the widest variety of experiences and sources.

Recently, University of Pennsylvania psychology professor, Philip Tetlock conducted a multi-year study of the outcomes of expert political forecasts about international affairs. He studied the aggregate accuracy of 284 experts making 28000 forecasts looking for patterns in their success rates. Most findings were negative – conservatives did no better or worse than liberals; optimists no better or worse than pessimists. All were only slightly more accurate than chance, and worse than basic computer algorithms. Only one pattern emerged: how you think matters more than what you think.

“ The most important factor was not how much education or experience the experts had but how they thought, “ says Tetlock. “The better forecasters were like Berlin’s foxes: self-critical, eclectic thinkers who were willing to update their beliefs when faced with contrary evidence, were doubtful of grand schemes, and were rather modest about their predictive ability. The less successful forecasters were like hedgehogs: they tended to have one big, beautiful idea that they loved to stretch, sometimes to breaking point.”

Beginning with the idea that foxes are better at predictions than hedgehogs. Tetlock looked at the underlying differences in cognitive approach and found clear differences. Foxes are cautious about making predictions. Hedgehogs are not, but are more likely to suffer from overconfidence and hindsight bias. Foxes are avid gatherers of ideas from many sources. Hedgehogs specialise and resent ideas that contradict their thinking.

If something isn’t working foxes will look for a new idea or model. Hedgehogs seldom vary their approach and are more likely to use new data to tweak existing theories. Foxes readily accept they’re wrong. Foxes accept complexity. Hedgehogs believe in an underlying simplicity in everything. Foxes are more concerned with the evidence than the theory; hedgehogs see data as “noise” that obscures underlying truth. Consequently, foxes are better equipped to survive in rapidly changing environments in which those who abandon bad ideas quickly hold the advantage. Hedgehogs are better off in static environments that reward persisting with tried formulas.

Little did I realise on the 18th that the global economy would take such a fast turn. In our next blog, we will look at the whether a fox or a hedgehog is needed for the next period of what has been a fairly good run in the property market. Look forward to “meeting you again, at the Junction”, that’s the Homeloan Junction, of course.

Yours in Property.

Affordable housing market [ Important Message]

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This blog has taken little effort but the message is so important for those of us in the home loan industry that, if you have not read it, you need to.

Three reasons why:

  1. If the country is housing its people, that’s good. People don’t break what they own, generally. If the property gains in value, they have an asset to increase their wealth. Whilst doing this, their creditworthiness increases which could assist them to access borrowing for brown and white goods. In short, the economy grows and further jobs result.
  2. More homes for different target markets will be built and our shack dwellings will decrease. How cool would that be! Dignity for our people and, on a smaller scale with millions more people, the same virtuous cycle above.
  3. Knowing this, you can direct your sales attention to the mass market. Hard work we know but those that I know are doing it, find it lucrative. Opportunity in the wings!

Here is the article from Moneyweb, 12 August 2015:

 

Affordable housing market sparkles

b2ap3_thumbnail_unnamed.jpg
CAHF report: since 2011, bonded sales in the R300 000 to R600 000 category rose faster than others.

Ray Mahlaka  | 12 August 2015 | moneyweb.co.za

Read Full Article

 

Yours in Property

Take control of your monthly expenses today! [Free HLJ Budget Tool]

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Funny how things happen at the same time!

In this post we will give you our Homeloan Junction Budget Tool and refer to a Moneyweb Today article. The Moneyweb post arrived just as I put the finishing touches to the HLJ Budget Tool. Serendipitous, I would say!

So why the Tool?

Most of us don’t have a budget. We live from hand-to-mouth, month-to-month and while away our time and our money on necessities and fancies. The danger is that as this forms a habit pattern, we wonder where the money’s gone and why there’s so much month. Month after month, year after year, we live as if there is no tomorrow financially. Often, if we’re really honest with ourselves, we take on bad habits in the process – we eat, drink and smoke too much. After all, life is stressful, you know. Then, we may rack up some unexpected medical bills in the process as we get older. All part of life, you know.

6% of South Africans can retire comfortably. In case you wonder about the other 94%, they don’t retire comfortably by level of degree.

What we mean by that is that the next 6 % below the “comfortable 6%”, live a little less than “comfortable”. Starting to experience the world of retirement myself a little, I have family in their 80’s. Retired since age 58, 25 years later they’re finding prices very high. Thank Goodness, they have not squandered their money but things are tight – much tighter than when they retired.

What we learn from this is that retiring with income that rises, or is supplemented with assets that may be sold, is wise financial planning. So, the next 6% behind the second 6%, is probably already not ready to retire at all in South Africa; of a truth, the situation quickly becomes dire and a Government pension of about R1600 per month, rising at 6-7% per annum, does not satisfy even basic needs.

Everything in our beautiful, tortured country points to sadness as we ponder these thoughts. My wife read me an article the other day that said one of the greatest gifts you can give your children is to not be a burden to them in your retirement. Oh may that be a simple goal for you when you finish reading this blog!

Get the full Moneyweb article here – MONEYWEB-TODAY-ARTICLE.pdf

Using elementary Excel, I have created a Tool for you to budget. Customise it for your own circumstances and please note that the numbers are just examples, so put your own in.The Tool allows for your Gross Income. It then deducts your direct expenses like UIF, Income Tax etc to arrive at your Net Income Before Expenses.

Then it deducts two kinds of Expenses: Need To Have’s and Want To Have’s. Call them what you want and re-arrange the items as you wish [after all, we need a little retail therapy or entertainment some time J] but just be true to yourself. Question what you earn and what you spend honestly. Commission earners especially project their earnings – like true sales people, they often believe they are going to earn more and spend less than they really do over the long-run. Don’t fool yourself. And, if you really want to test your reality, then commit to an extra amount repaid monthly on your bond and see how good you are at sticking at it.

You can download your copy of this tool here –HLJ-Budget-Tool.xls 

The point is, every few hundred Rands you save in this exercise could literally put you into the top 6% at retirement. And, keep you there.

 Now to the final points……….

1. I am not a financial advisor, so speak to yours and begin to commit to a long-term savings plan. Retirement Annuities, Satrix, DBX’s etc are great vehicles to discipline your savings. And, by the way, remember some Life and Disability cover for those you love, if you don’t make it.

I have tried to teach all financial levels of people the simple fact of compounded interest. By the way, Albert Einstein called it his “most profound” learning. Two elements for now:

  • R100 invested for 10 years and 20 years at 8% is R18294.60 and R58902.04 respectively. The compounding is not a straight line as interest on interest continues to kick in the more you save.
  • The inverse of this, which the Insurance industry correctly calls “the cost of delay”, is that if you want R60000 , then the faster you start saving the less you have to save. R60000 costs you R101.86 over 20 years and R327.97 over 10 years, both at 8%.

2. I am a banker, so back to the tired old truth that your bond is a good place to save. Whatever interest you save is at your bond rate after tax.

For example, at a bond rate of 10%:

Bond: R80000
Years to go: 20
Repayment: R7720.17
Total Paid: R1852841.56
Interest spent: R1052841.56
Payment increase of 20%: R9264.21
Years to pay: 12.83 years
Total paid: R1426688.00

Original total payment less new total payment: R1852841.56-R1426688.00 = R426153.56

SAVING AFTER TAX: R426153.56

Homeloan Junction cares. This blog may seem trite and simplistic to some. To others, it may just be the spark of new financial life. If it touches one life today then the last two hours writing and calculating has been worth every minute.

Yours in Property

Is your tenant an illegal occupant?

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There’s a thorny issue in renting and that is when your tenant is an illegal occupant of your apartment.

Let’s consider the issue in this blog.

If a rental contract is breached by a tenant and, after receiving notice, he does not undertake the necessary rectifying actions in the specified time, then the landlord may cancel the contract. The tenant is then considered an illegal occupant.

If the occupant refuses to perform his duties in terms of the rental agreement, then he will be found to be in breach of his contract. As an example, the tenant refuses to pay his rent on time. The landlord must inform the tenant in writing that he has decided to cancel the rental agreement so that the tenant, within a reasonable time or a time agreed between the parties, can vacate the premises.

If the tenant chooses to ignore the cancellation notice, and continues to occupy the premises, he will be seen as an illegal occupant. The same principle applies when the tenant continues to occupy the premises after the termination of the rental agreement. An illegal occupant may be evicted from the premises by the landlord. This process will occur in a magistrate or high court so the services of an attorney will need to be retained.

There is no longer a common law right to evict a tenant. All landlords and tenants have to follow the processes and procedures of the PIE Act [Prevention of Illegal Evictions Act, 19 of 1998]. According to PIE, before an eviction may occur, the tenant must be informed about the pending action against him. At least 14 days’ notice must be given of the trial and its date and location. This notice must also be sent to the respective municipality.

On the date of the hearing, the court will consider various factors, such as, if the tenant is an illegal occupier, if the landlord has reasonable cause for eviction and the question of alternate accommodation will be considered. All of these factors will be considered before the court makes a decision to issue an eviction order or not. It is currently a criminal act to evict a tenant without a court order. In turn, constructive eviction, such as disconnecting the electricity or water, is also illegal and considered a criminal act.

The type of action or application that a legal advisor will propose will depend on the facts and circumstances of the case. These actions or applications will be heard in the magistrate or high court. If the legal process is successful, the eviction notice will be issued after which the landlord may proceed to evict the tenant.

There are certain clauses that must always be in a rental contract in order to protect both parties against lack of payment or breach. These clauses include: time limits, court jurisdiction and responsibility for costs if the parties decide to go to court.

The PIE Act clearly sets out the steps and procedures that should be followed to obtain an eviction order. Various definitions and interpretations of other terms are set out and clarified as they apply to the landlord and the tenant. These should be clearly documented in the rental agreement that the parties sign.

The moral of the story is simple: If you wish to protect your investment in the face of an errant tenant, you need to obtain professional help early in the process. The PIE Act is not against landlords but it certainly does protect the rights of tenants; but not without holding them accountable for proven, unacceptable breaches of a well-compiled rental contract.

Yours in Property.

2015 Property Market Trends

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Economics, or The Study of Graphs or e-Comics, if you prefer.

For some, as confusing as a dassie’s run, as unpredictable as the weather forecast and as boring as watching washing rotate. But for those of us who love e-Comics and follow the trends, always fascinating. Beware though, ignore it at your peril especially if you are taking on debt. On the other hand, don’t allow it to be the source of your motivation or else, your effort will undulate like an interest rate graph.

Be informed, be motivated.

So let’s unpack where we believe we stand at the moment and for the next year or two in simple language. Allow, as I broad-brush the issues, for some “averaging” that may not align with your favourite economist’s views.

Affordability: This aspect is really vital when considering buying a house. For the last 2 years, house prices have been rising. House prices alone contribute to affordability issues for buyers: not enough deposit and not enough disposable income to pay for the required bond. Interest rates have also risen and simply raise the bond’s payment per month. And finally, the National Credit Regulator [NCR] has been vigilant as regards affordability calculations that Lenders allow for their clients so it is increasingly more difficult to get a bond in the first place. Lets just take these three factors together and compare what can be afforded:

R40000 per month equated to R12000 [30%] per month and a bond of R1357910 at Prime of 8.75% over 20 years. [situation 2 years ago]

R40000 per month equated to R12000 [30%] per month and a bond of R1310234 at Prime of 9.25% over 20 years. [with 0.5% rate rise]

R40000 per month equated to R10000 [25%] per month and a bond of R1091861 at Prime of 9.25% over 20 years. [with tightened affordability]

These are rough figures but the net effect on the bond is R266000 less can be borrowed assuming you did not receive an increase. You probably did, but with it came increased “everything” that squeezed your affordability in any case.

Not sure what you can afford, Have a look at our online Affordability Calculator

House prices: Depending on who you read and the segment, house prices have been rising at a real rate of about 2% so make that about 8% per annum. Given that the same house is therefore getting more expensive, let’s see what impact the increases have on our affordable bond size, based on the above examples:

R40000 per month equated to R12000 [30%] per month and a bond of R1357910 at Prime of 8.75% over 20 years. At R10000/m2 and no deposit required, you could buy a house of 136m2.

If we just raise the price of the house by 8% per annum for 2 years, then your house area reduces to 115m2 which is much smaller. Put another way, at a 30% affordability factor, you would need to earn R46915 per month in order to afford the 136m2 house.

If we factor in the increased affordability criteria of 25% and the raised interest rate, your house size reduces to 109m2 and your salary per month needs to increase to R58393.

Once again, rough figures that show the effect on affordable house size and required salary as house prices rise at 8% per annum.

Confidence: We have written about this factor before but it bears repeating. The courage that it takes to sign for a 20-30 year bond with a bank cannot just be measured in numbers. The confidence that a buyer has in their ability to repay the bond and watch their house value grow year by year is critical to the Buy decision. We consider, our job’s security, the state of the economy and politics, the timing of children, the holidays, marriages and so on. We remain cautious and only go ahead when we are confident that we can afford our house in the foreseeable future. Nothing beats having confidence when we are buying and selling houses. Similarly, the area we live in needs to give us a sense of confidence that it will retain its value and not decline as a suburb. If there is a general sense that this is the case, prices will rise and, if not, then prices will drop. The movement will be driven by confidence in the area.

So in reading property economics articles, see what’s happening to interest rates, house prices and the general level of salaries. Then step back and think about the level of confidence in the country or a particular area. The intersection of these factors is what drives property economics and you can be guided quite clearly by their trends.

So what about now? Well, house prices have been rising generally and steadily since interest rates declined a few years ago and we came out of the shock of the sub-prime crisis in 2010/11. Now it seems that interest rates are going to rise off the back of the USA’s decisions. The amount varies between 0.5% and 1% from now to the end of next year. My view is on the lower side as our Reserve Bank tries to rein in inflation, retain the strength of the Rand whilst helping jobs growth. I also don’t think the USA will do anything too dramatic both in amount and per period. The net result for our property is that price rises will reduce their trend and sales will remain lacklustre for a about 2 years. Then we can look again.

In our last blog, Homeloan Hunction went from this story into motivation. If it all sounds too un-impressing, go back to the previous blog and Look Up and mix with Motivators.

3 Steps to master staying Motivated in our Economy

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In this blog I was going to write about the economy. But I have decided to talk about a few aspects of motivation.

One thing about the economy and the circus in parliament, is that we always need to be motivated. We who awake to a new month every month, must somehow understand what’s going on and then lift ourselves above the negative and move on. I like John Loos, FNB’s Property Economist. I have known him for many years as a good writer, extremely well researched and with a sense of humour. He wrote this month in the FNB Property Barometer:

“Some minor increase in economic growth in 2015 is not expected to provide any meaningful boost for residential demand growth in a slowly rising interest rate environment. While nominal house price growth may be slightly stronger in 2016, compared to 2015, this would be due to higher CPI and wage inflation next year and not necessarily due to market strengthening.

Rather, one should look at our real house price growth forecast, where house prices are adjusted for CPI inflation, to see our forecasts of weakening residential demand growth through 2015 and 2016 being reflected. Here, we expect a turn from positive average real house price growth for 2015 to negative real price growth in 2016.

Let’s make no mistake, the indicators still point to mediocrity at best.”

In turn, Barclay’s forecast of interest rates is that they will rise in September but as early as July 2015, from 9.25% to 10.50% by the end of next year.

What all of this is saying to you and I is that 2015 lacks lustre but is pretty good under the circumstances. 2016 will appear slightly better as GDP rises but inflation and rising interest rates will probably push things a little lower – hence the words: “mediocrity at best”.

But the great thing is that we have a task to wake up to. Some would say you don’t choose Property, Property chooses you. If that seems true in your life, then here’s some thoughts to take with you.

3 Steps to Master staying Motivated in our Economy:

  1. Look Up. Psychologists and Neuroscientists will all tell you that Looking Down is sure to take you down. The only time you look down is to gain perspective. Lift yourself out of the current pressure, step back from negativity, take a helicopter view and assess what is preventing you from success and motivation and then Look Up. The period you look down and around you is to understand what’s going on, what the causes are or may be, what you are allowing to control your life and how you may begin to arrest control again. Looking down is for perspective – is Eskom really that bad? Is South Africa really going to the dogs? – and then armed with the new truth, you begin the actions and the self-talk that take you back to positivity and motivation. That implies you Look Up. So what happens when you do? Well, faith begins to flow in your veins. If you are spiritual, you will know exactly what I mean. If you are less so, you will begin to “confirm” what is good and can still be counted a blessing in your life and in your country. You see, it is the action of taking the reality and then deciding the path through it, that is motivating. It is Action that casts our Fear, it is Desire that replaces Fear. You cannot deny how you feel but you can decide to not allow your feelings, often expressed as Fear or Negativity, to control your actions. Feelings are not inane, they have life and energy – one lecturer in my Executive Coaching diploma said “feelings are as good data as sales graphs.” The only question is how do you order your “feelings”, how do you take grip of them and allow their energy and “tingle on your skin” to drive you to success. Look Up is not so much a mighty action to Permanent Motivation but rather a day-by-day attitude to make the best and be the best you can be. Like a good golfer or tennis player, you look at those around you only to gain insight, to learn, to propel yourself and your game to new heights.
  2. Make Choices. There is a wonderful saying: “You make the choice and then the Choice Makes You.” How true! How many times do we look back and wish our choice had been different? But on the other hand, how many times do we look back and see the power and the sense of direction in our choices? Encourage yourself with those events that have been as a result of your choice and have turned out well. The lovely thing about Choice is that the one you make today is the one that sets the new direction. I struggle to say that your future is solely in your hands and you can create your future – I leave much room for the will of God. But it is undeniable that when a good choice has been made, it has changed the course of my life for good. Choices of who to marry, which company to work in or leave, what to study, what business to pursue, have all affected our lives and made them what they are. If the choices we have made in the past are so powerful to have brought us to this point, then why are the choices we decide on today not just as powerful? And things we must remember: Big choices are often disguised as small – what you eat is who you are, exercise is beneficial and taking some “me time” strengthens you – tiny things that when consistently applied, can change the way you think and who you become over time. Secondly, making a choice is Taking a Risk. I like to talk about the law of Unintended Consequences. Just like Murphy’s Law [if something can go wrong, it will], unintended consequences will occur – after all, you are just human and you cannot see everything that can happen. Making a choice often involves risk-taking. The challenge is not to stop making choices, the challenge is to manage the risk. Do that as part of your decisioning, do that as you transition from one state to another, and then be prepared to do that as your choice unfolds through action and execution. Risk is not risk because it does not exist for the fearless entrepreneur [yes that’s you every month, my successful homeloan consultant and estate agent!], risk is not avoidable, it is only to be managed.
  3. Choose Your Company. It is the people we mix with and spend time with that define who we become, what we believe, what we consider as important and how we progress. That cynic, the person who with sarcasm makes some people laugh, the demotivators who complain all day and live here anyway, the guy who is unfocused and complains about the state of the market – all of them have more of an impact on us than we choose to believe. I listened to JP Landman last week as he spoke about removing the “noise” so as to see what is really happening. On Kyknet, he had previously described himself as a “Rational Optimist” – he sees the reality and then sees the hope for a brighter future. Needless to say, it was refreshing for me. Sometimes seeing politicians turn the gravitas of parliament into the colourfulness of a circus, sometimes sitting in load-shedding is not “romantic”, sometimes, well, I’m not as optimistic as I should be.. but then I am in the company of a man who provides tangible proof that “things are not that bad” and my spirits lift. When you’re feeling the stress of the market, when cash flow looks bleak, when relationships falter, when flu strikes, when illness besets you – look at the company you’re keeping. Do those people motivate and encourage you? Do they make you laugh until your belly wobbles? Do they inform you, guide you, express an honest opinion, avoid advice and let you think things through yourself? Find these people, mix with them and see the difference. And, by the way, BE ONE FOR OTHERS.

Motivation is not a feeling, motivation is an action. Homeloan Junction says to all of those that share a common view, Look Up, Make Choices and Choose Your Company – it may just be the antidote that changes the course of your life.

Yours in Property.