The sector that is leading the supply for new homes, both for primary residential use and investment use, is the sectional title segment of the residential market. Estate living with communal facilities, security and entertainment services has become mainstream for first-time homebuyers and investors alike...
Sectional title homes now account for more than 30% of property sales in SA, which is a significant amount, considering that only three of the nine SA provinces are the main producers of sectional title developments; with Gauteng accounting for 50% of all sectional title developments.
Given the importance of this type of residential development approach, it has become important for all buyers, especially first-time home buyers, to understand how their property investment is positively or negatively impacted by how the estate or complex is managed to the benefit of its residents.
As an owner in a sectional title development, you have both rights and obligations to the complex, to ensure you’re able to enjoy the full use of the common facilities, your home and to uphold the standards and conduct of the estate.
Therefore, it would be in your best interest to consider three key factors when you have bought into a section title estate.
What are the levies costs and by extension, what services are provided for from this cost? This is a key piece of information to understand, as you will be required to pay this amount consistently as a homeowner. Further to this, it will assist you with planning of how much you should budget towards the upkeep of your home.
What are the conduct rules of the estate? By knowing the rules, you equip yourself with information on how to enjoy the common facilities and to understand how to improve the rules in future for the benefit of everyone living in the estate.
Get involved and volunteer your time and efforts to contribute to the body corporate as a trustee. By becoming a trustee on the body corporate, you not only get a better understanding of how to maintain your property, but it’s the best way to have a say over your property investment. You will also have a say in how resources are allocated towards investment in upgrades of facilities and how these can be used to improve the value of your property.
The consequence for not observing and considering these factors could be very dire for your investment. For example, if you’re not aware of the cost of the levies and have not budgeted appropriately for this cost, it could put you under financial pressure given that it’s an ongoing cost.
The most detrimental consequence is when homeowners are unable to maintain their levy payments, this causes strain on the body corporates’ annual budget to maintain the facilities. Ultimately, if the body corporate becomes poorly managed, both due to a lack of involvement from homeowners and non-payment of levies, the estate could become insolvent. The impact is you would be unable to sell your property at market-related prices as new owners will avoid buying in an estate that is poorly managed.
The banks lending new buyers’ funds to purchase in the estate will require copies of the audited financial statements of the estate. Should this reflect an insolvent state, they will decline the home loan application to purchase in the estate, despite the potential buyers being creditworthy.
Buying in a complex has many advantages when homeowners are well informed about how the estate generates funds to maintain its facilities and by each owner making time to contribute to the upkeep of the estate. It’s unfortunately the burden that comes with communal living, as the consequence of the action of the collections always impacts your property investment in a sectional title.
Use an independent property finance company like www.mortgagemarket.co.za to find out more about estates in areas that are well maintained and are good investment options both for primary and investment use.