Thursday, 17 September 2015

Home is where the heart is

(First appeared in New Era 15 April 2015)

The heading of todays’ column is a quote from Gaius Plinius Secundus (AD 23 – August 25, AD 79), a Roman better known as Pliny the Elder. He was amongst others an author, naturalist, and philosopher, as well as naval and army commander of the early Roman Empire. He is also well-known for the quote, “There is always something new out of Africa.” (Source: Wikipedia)

As a newlywed couple, my wife and I have started looking at a house to purchase as the present place we call home is a rental and is not putting any long-term value on our balance sheet. The cost of housing is already well-known and most of us have heard the cry of “Affirmative Repositioning” which seems to imply that land for housing must be made available for all Namibians. However, regardless of whether you purchase an existing house, or get a serviced erf from the local authority, you must still be aware of the hidden costs in the purchase of a property.
Most buyers are not aware of these hidden costs which include costs to transfer the title deed onto your name, registration of the bond, service connection costs to your property and most importantly your loan repayment that could increase due to interest hikes. As part of our homework into purchasing our ideal home, I have tried to define these hidden costs. To provide an indication of what these costs can be, I have used a house purchased for N$ 1 million in the example and placed the estimated hidden cost in brackets where possible.
(a) Transfer Costs – this is the legal cost of having the house registered in your own name and includes deeds office fees (N$ 300); Stamp Duty (N$ 4,000); Transfer Duty calculated as a percentage of the property value (N$ 4,000); Transfer Fee (N$ 10,000); Admin fees (N$ 400) and VAT at 15% (1,560). Total Transfer Cost = N$20,260.
(b) Bank Charges – most commercial lenders charge a bond initiation fee as well as a bank administration fee. These are charged up front and added to your account. Once the property is registered in your name, (and this might happen even before you move in), your monthly repayment will start.
(c) Service connection costs – most local authorities and other suppliers of water, electricity and telephone expect a deposit before the connection is made and then charge monthly according to usage. Usage can fluctuate and be unexpectedly high during periods of personal problems and cannot always be accurately reflected on a statement due to “usage guessing”.
(d) Property Rates – this is a monthly fee charged by the local authority based on the municipality estimated market value of the property. This rate tends to increase by 8% per year and is presently N$ 0.000914 times the site value and N$ 0.000471 times the improvement value in Windhoek. Thus a property with erf valued at N$ 300,000 and improvement value of N$ 700,000 would have a monthly rate of N$ 603.90 or N$ 7,246.80 per year. (NOTE: Before buying a property, ensure that all previous service charges on the property are paid in full.)
(e) Monthly levies – these are only applicable if you are buying in a complex (sectional title). You will need to pay a monthly levy for shared services in the complex and these can be costly.
(f) Maintenance of your home – there are always thing that break and need to be fixed. Even if you rent out your property, remember that certain items are still your responsibility to maintain.
(g) Insurance – you will need homeowners insurance that will cover any unforeseen circumstance such as your house burning down, etc. In addition, the bank will probably also require you to take out life insurance that will cover the rest of your bond owed in the event of your death.
If you can budget properly and identify all these hidden costs to ensure no surprise, you will enjoy your home for many years.
As for my wife and I, we have decided to go back to the drawing board and find an additional form of income to increase our ability to own a home.

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