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A few months ago, before we had moved into our new house, I decided that one of the small things I couldn’t wait to do was to install a knife rack.

Needless to say I grossly under-estimated the amount of critical work (cleaning, fixing etc) we had to do before we got to the luxuries like curtain rails and knife racks.

Anyway, last night I fitted the knife rack. It definitely feels like we’re making progress.

Please excuse the shoddy mobile pic!

Oh how naive I was to say “I’ll be tending to dodgy doors on saturday evening”…

More accurately I think we’ve spent about 48 man-hours cleaning this weekend punctuated with bouts of repairs and miscellaneous DIY… The high point probably being when I was lying on my back with my face wedged up against the side of the toilet while we hack-sawed, hammered and generally bashed-off the toilet seat off in order to fit the new one.

But the house is starting to look like a home. I’m taking tomorrow off to tend to other issues like alarms and showerfittings.

The cat finally left the bedroom and is now investigating the entire house and returning to her normal non-leopard crawling self.

I suspect we have a few weeks of repairs and touchups ahead of us before we can safely let the general populous into our abode, but I’m soooo glad I took a bunch of photographs of the place a few weeks ago while the previous tenant still lived there. The before/after photographs are going to be amazing… I hope!

Lots of love,
J.

So last night we finally signed and initialled all the bits of paper that basically say our combined asses belong to the bank until we pay off our newly incurred seven hundred and fifteen thousand rand, plus interest, debt. I’ve got to be honest, even though it’s hardly an expensive house, I did have those little voices in my head screaming something along the lines of “WHAT THE HELL ARE YOU DOING?”.

I felt very happy walking out of that office though. It was like taking a big step towards being a grown up… like the first time a salary clears in your bank account, or the first time you tell your boss to shove it. Steps towards being a big person basically ;)

Then we went home and opened the bottle of champagne. Although this last step was purely an administrative process, the fact that we signed something like 100 sheets of paper made it feel champagne worthy.

Lynnae had made a South East Asian curry for a shoot that day which we promptly consumed… It was so good it had me grinning from ear to ear. I’m telling you guys, being a grown up is underrated.

Hearting life!

This one should be short and sweet, it’s really just a brain dump of a conversation I had with a friend who had the all too common argument of ‘But It’s so expensive, I can’t afford R9500 payments’. It’s the same excuse I used for years, but it’s only semi true.

Housing is a commodity. All commodities are subject to supply and demand economics. There are millions of people who would love to buy a house and only a few houses.

Supply and demand says that when there is high demand and limited supply, prices go up… not everyone understands why though.

Think of an auction: The audience is made up of an accurate cross section of South African society. 90% of them earn less than R5000 a month. 5% earn around R10 000 a month. 3% earn around R20 000 a month, 1% earn around R35 000 a month and the other 1% earn more than R45 000 a month.

(I made those stats up because the StatsSA release is so racially oriented I was unable to find a non-race income breakdown. If anyone knows of better percentages I’d love to see them)

Ok, so we’re at this auction and there are 98% of the people earn less than R20 000 a month… and there’s only 3 houses for sale. That last 2% will outbid anyone in the other 98%, but they’ll stop when it starts hurting…. the housing price is therefore completely linked to the salaries of the highest income earners in the country. Now, people like my friend and I are lucky to be in or near that top 3% but we certainly aren’t that top 1%. Which means that whenever we want to buy there will be some fatcat pushing the price up… but with some belt tightening, we’ll be able to afford it.

Ask an older friend who bought property about their bond repayments… I know guys who are paying R950 every month towards their bond. The natural instinct is to say ‘Oh man, I wish I’d bought when the prices were still so low”, but the truth is, the prices were never low. My parents had to pay R120 bond payments when they first bough their house 29 years ago. They struggled. My mom says there was a time when the stopped buying cheese because it was a luxury!

It all boils down to this. Unless you are earning a salary in the top 1% of the population, it is going to hurt a little bit when you buy property. But soon enough salaries will go up and your bond payment will stay R9500 a month. I just know that one day, in the hopefully not too distant future, someone will say ‘Oh man I wish I had bought property when the payments were still under R10 000′.

(I realise that this summary completely ignores cheaper housing in cheaper areas, but I did that to keep it simple)

ps. Analysts predict that the housing price will skyrocket in 2010… but there’s a chance (Skye, block your ears) that we might be in for another percent increase in prime during August. Eek!

Be sure to read the overly long winded “When to buy” post first if you care about this stuff.

I think it’s very important that people enter into property buying with their heads and not with their hearts. Property is much like gambling in that there is often some game theory going on… you like a place but don’t love it, should you buy it and risk not being happy, or not buy it and risk it being sold and not finding anything else?. This stuff is stressful and you’ll probably find yourself lying awake at night with your mind running through all the variables… Having said all that, there is one thing you need to do right from the very beginning and then never budge on it: Set a price and stick to it.

Getting to that price is easier said than done… Here’s the steps you should probably follow:

1. First you need to know what the bank will give you. A place like Ooba is a good start. Be prepared for a little bit of paperwork.
2. Next you need to know whether you can afford the repayments. A spreadsheet and budget will help you here. It’s imperative that you be realistic and conservative. Find out what you’re paying on bank charges, go through your credit card statements, include EVERYTHING… Perhaps start keeping your pick ‘n pay receipts so you know how much you really spend on groceries. You’ll want to be in a position where you can make your payments (at 2% or 3% higher interest rates) and live comfortably.
3. If you’re like us you’ll notice that the banks are quite happy to offer you much more than you can probably afford. We qualified for about 250k more than we ended up buying for. Based on your budget figure out what payments you can make comfortably and work out what your total bond amount would be based on those monthly payments. I like this bond calculator. Ask you bond originator what interest rate you should do your calculations on. They’ll probably give you an accurate conservative figure. If we had bought on the limit we qualified for our quality of life would have decreased significantly until one of us got a raise… not something you want to bank on… and we would have been up shit creek if the interest rate went up by 2%… something that you unfortunately need to bank on. (It probably won’t happen, but you need to bank on it)
4. Once you’ve got your final number you can start looking for a property. That’s step 3 which is coming soon.

over and out.

j.

Just thought I’d write a little update since everyone is asking.

We got the house! It’s about 107 years old and in perfect condition except for the bathroom which could do with some love. There is a tenant in the house already so we’re going to maximize on our existing leases and only move in during the month of December… The wait is killing us but it’s also giving us lots of time to look for bathroom fittings, tiles and other similarly domestic things. The one thing I’d always wanted was a house with a fireplace (preferably a little Dover stove) and now I have one! We’ve also been planning our herb garden which I think is going to be a tiny piece of awesome. My biggest concern is the audio visual wiring. I plan to run RJ6 coax and BNC wall boxes, with BNC to Belling Lee fly leads and an RF Modulator so we can watch stuff off the Xbox in the bedroom ;) Nerd much? The rest of the house will be covered by 802.11n/g/b wifi. How much does a 15″ touch screen cost? I’m thinking of turning my Alix into a “kitchen pc”. :)

I can’t wait to get in there with a drill and a flipping screwdriver.

Life is AWESOME.

Boilerplate Introduction: I’ve only just bought a house and I don’t claim to be any kind of expert. What I’m writing here is merely the things I learnt along the way… sometimes they might be blatantly obvious and other times they can be quite surprising. Because I’m no expert, please feel free to leave a comment if I’m wrong or you think I’m missing something. I wanted to write this now, before the shock and awe has subsided and before the lingo and concepts become too common place to seem unusual.

The obvious answer to the “when to buy” question is “When the prices are at their lowest and when the interest rate is about to start coming down“… That’s obviously hard to predict, but there are some things that will help you.

Low prices are caused by a few things:

• Overstock: There are too many houses on the market and sellers drop their prices in order to be more competitive than the place down the road.

• Tough Times: In tough financial times there are fewer buyers. When there are fewer buyers you need to entice them by lowering prices.

• Overstock, Tough Times and Desperation: This is the trifector. Tough Times cause more people to sell which causes Overstock which causes people who really need to sell to push their prices down. Its a very uncomfortable place to be for a seller and one would assume that most sellers would just try and weather the storm… but, as you can imagine, not everyone can…

Why People Sell Their Property

You get a few different types of sellers and understanding them can explain the market and help you predict when and how things are going to pan out.

• Distressed Sellers: These are the guys who have either lost their jobs or bought at the maximum amount that their banks would allow and are now unable to meet their monthly payments because the interest rates have gone up 5.5%.  On a 1 million rand bond, 5.5% means your monthly payment went from R8 970 to R12 790 (Roughly R4000 per month). These guys risk forclosure from the bank… which essentially means the bank will auction the house at less than it’s worth and force the owner to pay the difference. ie. Lose everything you’ve paid into your house and end up with a crapload of debt and a very bad credit record. This is where you’ll usually pick up property at very low prices. I’m glad I didn’t need to buy property from a person like this, I would have felt too bad.
• Investment Sellers: These guys have money and probably a few properties. They bought back in the day and are probably renting the place out. Investment Selllers understand that the market will always recover and they’re willing to wait it out. These guys are responsible for the R900 000 properties on the market that suck more than the R600 000 properties. They’ll leave it on the market at R900 000 until the market corrects itself or until some poor idiot comes along and pays R300 000 too much for the place.
• Liquifying Sellers: These are the guys who are trying to turn some of their assets into cash so that they can start a company or buy a yacht etc. They’re not as price concious as investment sellers but they also won’t settle for less than they paid. They usually have other options.
• Moving Up Sellers: This is typically a couple who have outgrown their house or want something better. They might even have bought another place already on the condition that they sell their existing place first. These guys can be quite desperate but are also not stupid. They have nothing to lose other than the chance to move into the home they really want. They’re also flexible and understand that property prices fluctuate so they might loose R50k on the place they’re selling and score R100k on the place they buy.
• Weird old ladies with bug phobias. You will occasionally run into some odd people selling their properties, especially when they’re selling privately. They can be harmless but can also waste a lot of your time. They typically overvalue their property because they haven’t had a property agent give them a reality check with a clue-by-four yet. I can’t imagine how painful it would be to actually try and buy a place from one of these people.
• FUD: Fear, Uncertainty and Doubt is an interesting aspect to all of this… Assume you bought a house 5 years ago for R400k, 2 years ago it was worth a million, but now agents are saying that the market is getting worse and your house will only fetch R900k. With looming interest rate hikes there’s a chance that before you know it your house will be work R800k. If you are not willing to wait out the next cycle (4-8 years) you might want to sell now while you might still get R900k.

The reason you need to understand the sellers is because it will help you put a price in perspective and know what a reasonable offer would be. You’ll usually be able to spot the sellers motives by looking at the house and asking the agent.

Value Cycles

The important thing to recognise is that Interest Rates have a direct impact on property prices.

There is supposedly a 5 year cycle in property, but the last boom was about 5 years ago… maybe more depending on who you ask. I think the cycle does definitely exist, but I think it is sped up or slowed down by other factors like Interest Rates, Inflation Rates, Politics, General Happiness, Voodoo etc.  I also think that the market is self-fulfulling to some extent. In other words, if enough analysts predict higher sales, people go and buy houses.

I think the cycle is anything between 4 and 8 years… the trick is obviously in knowing how to predict the troughs and peaks.

It seems that we might have just hit the bottom of one of those troughs. Analysts are slowly starting to predict better outcomes and Investec says that StatsSA have overstated inflation and the interest rate should proabably be 2% less than it is right now. To put that in perspective, that 2% represents about R1500 per month on a million rand loan. If the interest rate drops by the full 5.5% that it gained in the past few years it brings things down a lot more. But that is truly the BIG IF.

The bottom line seems to be to buy at the very bottom of a trough or while prices are going down… if you’re ready. Don’t get suckered into buying when prices are on their way up in case they go so high you’ll never be able to afford to own property… That’s the FUD speaking.

Over and out.

j

Stunning 2 bedroom house with a fireplace and a small garden in Observatory, We been having it!

There is a lot to be said for working with people who are good at what they do… I’ve been lucky enough over the years to work with a lot of experts. People who excel at their jobs and go out of their way to provide excellent service.

Then I tried to buy a house.

Oh my lordy is this an industry that needs to go on a serious diet and lose some fat.

Property seems to be one of those black box industries where you’re expected to just nod and smile while they withdraw large sums of money from your bank account and imply that you’re really way too dumb to understand where it’s all going and why… much like the Travel Industry… And I’ve worked in the travel industry for about 6 years so my BS radar is quite effective.

I could go on and on about how incredibly bad some of the experiences I’ve had over the past few weeks are… People who never get back to me… Agents who drag me to dodgy locations late at night only to discover the owner of the house isn’t there… Agents who make appointments with me and then cancel 5 minutes before the meeting because they ‘didn’t actually organise it‘… but I won’t because there are very good people out there who need some praise.

Firstly, and I must admit I am surprised by this, Ooba… specifically Colin from Ooba. This is a guy who has repeatedly surprised me by how efficient he is and how willing he is to take time to explain things in detail. He ALWAYS calls back, always replies to my emails, and always seems exceedingly knowledgeable in his area of expertise. I get the impression I’m dealing with a guy who is genuinely passionate about homeloans and passionate about excellent service. All that without ever saying “We’re passionate about…”. The few dealings I’ve had with the banks, INCLUDING MY OWN FRIGGEN BANK, have been painful, tiresome and actually left me more confused than I started.

Secondly, I’ve realised that there is a BIG difference between a good estate agent and a bad estate agent. The good ones take time to consider what you’re looking for, they don’t waste your time with rubbish. They call back when they need to, they don’t try and pressure you into making a purchase by spinning bullshit about the economy and how rare ‘a place like this is’… They use email and embrace the internet. They don’t lie or misrepresent the truth. Good agents won’t badmouth other agents while showing you around a property and they wont moan at you on the phone if you happen to agree to see a place with someone else because they didn’t get back to you in time. Good agents will spend a rainy night in observatory driving you around from location to location and be honest about the condition and “accuracy” of the owners asking price. Good agents will also deal with tricky owners and tenants and get you into properties where others have failed.

So here is a list of agents who get my nod of approval:

• Christian from Rose Eedes in Observatory.
• Leigh and Sharon Ball from Sharon Ball Properties.

Not a very long list is it? Considering I’ve dealt with about 15…

Also I’d like to thank Michael R. for giving me lots of good advice on the bond stuff… it’s nice to have a friend who can point out any pitfalls when you’re about to drop a fortune on a house.