Real estate investments in South Africa have grown more complex over the years, and many are becoming more anxious about its near decade long slump

Property prices for low and middle-income markets have grown in the first quarter. The value of new mortgages has risen by 8%, according to SA Home Loans. This is the highest in eight years. While South African-real-housing prices are-dropping and have been since 2016 to 2018. However, a closer look presented by the First National Bank (FNB) Property Barometer paints a different picture. According to FNB in nominal terms, year-on-year residential properties grew by 4.1%. But when adjusted for inflation, the prices of residential properties in the country are, in fact, decreasing.

While real estate remains one of the most attractive markets in the world, many are venturing into other investment strategies to diversify and maximise capital gains. If you’re only familiar with property investments, here’s a definitive guide on how it compares with other investment strategies:

Stock Market

While both are based on ownership, stocks and property investments are widely different. Stock markets are a bourse where you buy and sell shares of stocks, bonds, and securities. A data driven comparison on Towards Data Science points out that, against real estate investments, stock markets are cheaper, have higher returns, and are less risky. While stocks can be bought and sold in milliseconds, it takes at least sixteen weeks in South Africa to offload a real estate property. This means it’s harder to take advantage of real-time trends. The costs alone in property investments, including the new risks from the recently enacted Property Practitioners Act, overshadow the potential earnings compared to stocks.

Forex Market

The foreign exchange market is the polar opposite to real estate markets. The Forex market is the decentralised trading of currencies at a given price. Unlike the meticulous and complex requirements that go into real estate investments, the Forex market has low capital requirements and transaction costs. You gain profit by predicting movements of a currency against another.

The Balance highlights that currency trading is a 24 hour market which means whenever there’s an open market, you’ll be able to trade. Compared to immovable properties, traded currencies are liquid assets —easily convertible to cash. In fact, FXCM explains how the Forex market is the largest liquid market in the world with a daily trading volume of over $5 trillion (R73 trillion). Similar to how banks can back real estate investments, you can leverage your capital for higher gains in Forex through brokers.

Gold Markets

Considered as safe havens, gold and precious metals markets are more resilient to economic downturns and recessions. Like real estate, gold is a long-term investment. In tough economic times, investors tend to exchange cash for gold —pushing gold prices higher. As it’s less volatile compared to stocks, many investors advise putting gold at the foundation of your investment portfolio. As opposed to property values, however, the value of gold changes more often.

Despite the risks involved, investors are becoming more comfortable with real estate as it’s more tangible. As a passive income, the monthly rent that you get from properties can look more enticing than quarterly dividends from stocks. Nonetheless, a diversified and recession-proof portfolio remains the best investment strategy.

Source: Propertyinsider.com

Sellers, Choose Your Transferring Attorney

It is usually the right of the seller to nominate the attorney who will handle the transfer of their property and all the associated legal matters – and for good reason.  Of course, that doesn’t make it illegal for the purchaser to nominate the attorney.  However, the seller does expose himself to significant risk should he allow anyone other than his nominated attorney to effect the transfer.

In some cases, a purchaser may insist that his attorney be appointed.  This is usually motivated based on the fact that their attorney had agreed a lower fee to handle the transfer.  In other instances, there may be a linked sale – where the purchaser has a property that is being sold – and it is suggested that it’s easier for one attorney to deal with both matters.

Should a seller consider allowing the purchaser’s attorney to handle the transfer? In our experience, a seller should avoid this if at all possible.

When the seller appoints the attorney, then the conveyancer acts for the seller to ensure the contract is adhered to.  Both seller and buyer have obligations in a contract of sale – and the attorney needs to ensure that all parties fulfil these obligations.

When the attorney is appointed by the purchaser, and there is a dispute or non-performance by the purchaser, it becomes very difficult for the attorney to act against their client.  We’ve often been told that, in such a situation, they have a conflict of interest.

In reality what this means for the seller is that he has to then consult his own attorney and incur costs in doing so.  To further complicate matters, if the deposit is held by the transferring attorney who acts for the purchaser, the seller will have difficulty claiming damages against the deposit.  In such a case the transferring attorney will hold the deposit pending the result of a court case or settlement.

The situation gets even worse for a seller when the purchaser takes occupation prior to transfer.  We’ve often seen purchasers move into a property and then claim the seller has concealed defects.  They insist they are rectified at the sellers’ cost – even when the seller is not at fault.

In such a situation the seller is left with the option of either complying with the purchaser’s demands or taking legal steps to ensure the purchaser performs.   This results in delays and additional costs for the seller.

There is a counter-argument that the buyer has little protection in the event that the sellers’ conveyancer is used.  However, the conveyancer has a legal obligation to ensure the seller also complies with the contract.  In the event that the seller fails to do so, and the purchaser can prove such, the conveyancer has to protect the purchasers’ legal rights.

In our experience, where the estate agent has ensured the seller discloses relevant defects, and the contract is clear on the obligations or all parties, the potential for disputes can be minimized.

 

Steve Caradoc-Davies

Principal, Harcourts Platinum

Customers paying off home loans in just over 10 years, says FNB

While many South Africans dream of becoming homeowners, once the dream has been realised, the next big goal for home owners is to work towards being home loan free.

Although the familiar standard term for paying off your home loan is 20 years, over the years, homeowners have become more inclined to reduce the time it takes them to pay off their mortgages by easily adjusting some of their financial behaviours and bringing down their bond repayment terms.

“Our data shows that over the last 12 years there’s been an increase in the number of customers paying off their home loans in just over 10 years, moving from an average of 7 years in 2007/2008. This shift can be attributed to the global economic turmoil which led to the beginning of the 2008 credit crunch. However, even at the height of the credit crunch (2009 – 2011) customers were still paying off their bonds within 12 years,” says Lee Mhlongo, CEO of FNB Home Finance.

This dispels the notion that a home loan must be paid off over 20 years. Although the conversion is for customers to sign up for a 20-year term.

“There is clear evidence that customers are choosing to settle their home loans well before that time through well executed money management principles. We’ve also found that homeowners with smaller loan sizes take the longest period and that those with larger loans take the shortest time to payoff.

This can generally be attributed to entry-level-income earners having less disposable income to make extra payments as compared to higher income earners who have much more room to make substantial additional payments towards their home loans,” adds Mhlongo.

Although most home owners don’t have the extra income to go into one’s bond monthly, especially if they are first-time buyers, changes such as the recently announced interest rate cut by 25 basis points also plays a huge role in allowing customers to easily pay off their home loans earlier and save a massive amount in interest, provided they choose to keep their bond payments unchanged.

“In the end, paying off your mortgage early really boils down to one managing their short-term and long-term financial plans well,” concludes Lee.

 

Source : http://sapropertyinsider.co.za

The Best And Worst Ways To Use Home Equity, According To Experts

There’s a right and a wrong way to tap your home’s value.
The positive difference between what you owe on your property and its current value ― can be one of your biggest financial tools as a homeowner. As of last year, untapped home equity reached an all-time high of $14.4 trillion, about $1 trillion more than its pre-recession peak in 2005.

But before you begin funneling funds out of your home, know there’s a right way and wrong way to do it. We rounded up the best and worst ways to leverage home equity, according to finance experts.

How To Leverage Home Equity
There are a few ways homeowners can tap into the equity they’ve accumulated.

One option is a home equity loan. This type of loan is similar to a traditional mortgage, which is why it’s also sometimes referred to as a second mortgage. Home equity loans are installment loans, which means the funds are disbursed in one lump sum and paid back over time in equal payments. They’re also backed by ― you guessed it ― your home’s equity. Usually, home equity loans have a fixed rate that’s a bit higher than the primary mortgage but can be much lower than rates on other types of borrowing.

Another way to leverage home equity is through a home equity line of credit, or HELOC. Unlike a home equity loan, a HELOC allows you to borrow against your equity repeatedly and then pay off the balance, much like a credit card. Some HELOCs require that a minimum amount is disbursed initially, but there are no closing costs. Many HELOCs also provide a debit card and checks that you can use to easily access the funds.

There is one more option known as a cash-out refinance. Rather than taking out a secondary loan or line of credit, this involves refinancing the mortgage for a higher amount and taking the difference in cash. Even though you don’t necessarily take on an additional loan with this method, you still increase your overall debt load (with your home as the collateral) and pay closing costs.

4 Best Uses Of Home Equity
If you’ve built up equity in your home over the years and are looking for a smart way to leverage it, there are a few ways to do it.

1. High-Value Home Improvements

One of the most common uses of home equity is to invest in home renovations and upgrades. “The improvements that you make on the home will increase the value of your home and build more equity as a result,” said Jared Weitz, founder and CEO of United Capital Source in Great Neck, New York. “In some instances, home improvement projects such as adding insulation to your attic or installing solar panels can, over time, generate more value than the cost to complete.”

That’s not always the case, however. Some home renovations actually contribute to a lower home value. So before you borrow against your equity for a fancy kitchen upgrade or new pool, be sure it’s going to help, not harm, the resale value.

2. High-Interest Debt Consolidation

If you have other types of debt that are accumulating interest at a much higher rate, using your home equity to consolidate it could be a smart move, according to Tony Matheson, a certified financial planner and founder of Matheson Financial Partners in Walnut Creek, California.

However, that comes with a big, fat caveat. Debt can happen for a number of reasons. Perhaps you had to take out private student loans for college or live off credit cards during a period of unemployment. Matheson said that homeowners should first address the reason why that debt accumulated in the first place before considering debt consolidation using their home’s equity. “If it was spending beyond your means, you need to address that issue first or you’ll soon be right back in the same place, just with more debt,” he said.

3. Emergency Fund

Ideally, you have about six months’ worth of expenses tucked away in an emergency fund with your bank or credit union. But, as we all know, things don’t always work out ideally.

If you experience a financial emergency and you’re in the midst of a cash crunch, your home’s equity can serve as a low-interest alternative to credit cards or payday loans.

Keep in mind that if you don’t have an existing HELOC in place, it might be too late to qualify for one once an emergency arises, according to Kyle C. Jackson, a certified financial planner and senior wealth manager at Jackson Wealth Advisors in Ada, Oklahoma. But if you do have one in place, Jackson said, it would be a smart way to address short-term financial needs while you ride out the storm.

4. Real Estate Investing

If you’re an experienced real estate investor, your existing home equity can be leveraged to purchase additional investment property. “You might be taking out debt here on your home, but you’re exchanging that debt for another asset that potentially produces income,” said Russ Ford, a financial planner in Indianapolis and founder of Wayfinder Financial.

That said, real estate investing is risky business. “I’d emphasize working with somebody else who has plenty of experience if it’s your first purchase, so you don’t get yourself between a rock and a hard place. Always remember it’s not always smart to buy a property just because you can,” he said.

4 Worst Ways To Use Home Equity
Though home equity can be used to accomplish a number of financial goals, it doesn’t always make sense to touch it. Remember, your home is the collateral, so if you’re unable to pay back what you’ve borrowed against the equity, you could lose your property.

Below are a few situations in which it just doesn’t make sense to rely on home equity.

1. Buy A Car

Buying a vehicle using home equity funds is generally a bad idea. “I hear people wanting to do this all of the time, simply because the payment is lower,” said Bryan Haggard, a certified financial planner and owner of Michigan-based RetireMitten Financial.

He explained there are two main reasons why you should almost never consider this. First, the interest rates on car loans have been relatively low, so you’ll likely end up paying a higher rate on a home equity loan or line of credit. Second, the payoff terms on home equity loans are generally quite long. “So instead of paying off a loan within five years, you may spend the next 20 to 30 years paying off a car,” he said. Not only would you end up with a loan that would likely last longer than the car, but you’ll accumulate tons of interest over that time.

2. Invest In The Stock Market

As tempting as it may be, another overly risky move is using home equity funds to invest in stocks and other securities.

For one, the cost of interest on the loan will significantly eat into your returns. “And when you consider in the short-term market downturns that are often possible, you are better off leaving your money in a lower-risk investment,” Weitz said. “If things go south, you run the risk of not only losing out in the market but also on your home.”

3. Fund A Vacation, Wedding Or Other Expensive Luxury

You worked hard to buy your home and want it to continue appreciating over time, so one of the worst things you can do is treat home equity like a free piggy bank, said Ron Strobel, a certified financial planner and founder of the Idaho firm Retire Sensibly.

Using home equity to pay for vacations, weddings and other non-appreciating expenses is at best a waste of the value you accumulated in your home. At worst, it puts your home at risk if you can’t pay back the funds you borrowed. If you can’t pay for these luxuries out-of-pocket, it might be a good idea to rethink your budget or give yourself some more time to save up.

4. Cover Daily Expenses

Finally, using home equity to fund your lifestyle and daily consumption is never recommended. “Ideally, you invest your home equity in something that is highly likely to improve your life or provide a financial return on your investment,” said Justin Pritchard, a Colorado-based certified financial planner and founder of Approach Financial Inc. “If you’re borrowing to fund your standard living expenses, that money is probably not being put to its best use.”

If that’s the case, it might be a good idea to talk with a financial advisor and come up with a plan for getting your finances on track.

Serious Sellers Need to Hear This

Every market in the world operates on the basis of supply and demand.  The same is true of the real estate market.  When demand is strong and supply is low, then prices increase.  When demand is low and supply is high, then prices decrease.

Writing to you from Brisbane, Australia, I can confirm that it’s the same whether you’re sitting in Australia, New Zealand, South Africa, the USA, or anywhere on this planet.  What we’re seeing in many markets is that economic pressures have drastically reduced the number of buyers in the market and their purchasing ability.

South Africa, as well as Australia, has just come out the other end of an election.  There’s a lot of talk of government stability and the desire to stimulate the economy.  But the reality is that solutions will take time to impact the man on the street.  The economic factors that existed before the election still exist today.  And they’re not pretty.

So what does this mean for you if you’re a serious seller?  It means that the only way to obtain a result in this market is to listen to market feedback and make sure that you represent the very best value in your price range.

And I’m serious about being “the very best value”.  In markets like these, the buyers will shortlist and view only the properties they believe represent the best value.  So if you are not seen to represent the best value you won’t even get feet through your door.  And without buyer enquiry and viewings there is no chance of a sale.

What if you have buyer viewings but you haven’t received any offers?  That simply means you are attracting the wrong buyers.  Because your price is too high, you’ve attracted buyers looking for a property that is bigger, newer, or offers more.  They’re not offering on your property, as they’re not looking for a property like yours.

The buyers who are looking for a property like yours aren’t even calling your agent to view it.

Here’s the bad news:  unless you change your price to attract the right buyers, nothing is going to change.  I haven’t read one opinion from an economic expert that is expecting the South African economy and the property market to strengthen significantly in the next year or two.  I’ve read plenty of sales pitches to suggest it will.  But the cold reality is that this market we’re in now is here to stay for a while, at best.  Let’s be positive and not consider the impact of a recession.

This is not doom and gloom.  This is just a reality check.  I believe that the property market is still the most resilient and represents the lowest risk.  But if you want to sell in the next 2 years then you need a result now.  The longer you take the less you sell for.  Listen to the market.  Be the best value, and you’ll sell.

Steve Caradoc-Davies

General Manager of Harcourts International

The right way to tackle sectional title additions and alterations

An increasing percentage of home sales in South Africa are in sectional title schemes, and buyers of these properties need to be aware that they don’t have the same freedom with regard to additions and alterations as those who buy full title homes.

This is according to Andrew Schaefer, MD of national property Management Company Trafalgar, who says that the thing about sectional title schemes is that whatever one owner does is bound to have an effect on other owners – even if they just want to make changes within the walls of their own unit.

“Noise, mess, and security are all concerns for your fellow owners, even if you are just revamping a kitchen, renovating a bathroom or installing new flooring inside your unit. If electrical work or plumbing is involved, for instance, you may need to get a certificate of compliance in order not to invalidate the whole scheme’s insurance,” says Schaefer.

“And if the work is being done by a contractor, there could be a security risk with a group of non-residents and various delivery vehicles going in and out of the complex for several days, or a risk of damage to common property. This is why the Sectional Title Act stipulates that no alterations to units are permitted without the consent of the scheme’s trustees – and that they are allowed to limit the days and hours during which such work can take place, and may ask you to make special arrangements to ensure that the security of the complex is maintained.”

In addition, it is vital to ensure health and safety compliance on the part of any contractors working in the complex, so you will need to check that any contractor working on changes to your unit has the appropriate safety files, public liability insurance and any industry specific certification that may be required.

Following the correct procedure becomes even more important, Schaefer says, should you wish to extend the floor area of your section or make changes that would affect the exterior appearance of the whole scheme – and in fact, Section 24 of the Act states that you can’t do so without a special resolution of the body corporate.

However, before you even get to that, you should first consult the trustees to see if the scheme has rules regarding the materials and architectural style to be used if sections are extended, then find out what the local authority’s requirements and costs are for submitting building plans for your planned extension, he says.

Next you will need to get a quote from a land surveyor for drawing up a new sectional plan of the complex – which will need to be approved by the Surveyor General – and a quote from a conveyancing attorney to register the new plan at the Deeds Office. This will be necessary because any change to the size of your section will affect the participation quotas of the whole scheme.

Once you have all this information, Schaefer says you will be able to compile a proposal detailing your intended extension in terms of approved building plans and your agreement to carry the costs of drawing up and registering the new sectional plan, then try to secure the special resolution you will need to go ahead.

To obtain this, you can either approach all other owners in the scheme individually and get written permission from 75% of them in both number and value, or call for a general meeting and seek a vote of approval from 75% of owners or proxies present at the meeting, also in both number and value.

If you succeed, you can go ahead and get your building plans approved, build your extension and then call in the land surveyor to prepare the new draft sectional plan and get it approved by the surveyor general, says Schaefer.

One additional detail to watch out for is that if your extension has been built over an existing exclusive use area (EUA) that was registered on the previous sectional plan, that EUA will need to be cancelled and a new, smaller one ceded to you by the body corporate before the new sectional plan can be registered by the conveyancer.

“And while this may all seem unnecessarily complicated, it is really worth doing correctly, because if you don’t, your ability to sell your unit in the future may be severely hampered,” says Schaefer.

Source:  Property 24

 

Is WhatsApp changing real estate?

As new technologies and improved systems are perpetually introduced into our modern business environments, innovations in client communication is undoubtedly at the forefront of this rapid evolution. The real estate industry has experienced a flurry of new concepts and advancements in the past year especially with regards to agents having to incorporate real time communication tools into their daily practices.

We’re seeing an increased demand by clients to communicate with our agents and staff in real time which has resulted in a growing expectancy for instant feedback. This means that phone communication applications, such as WhatsApp, are fast becoming the primary communication tool for clients.

So too, these applications have become part and parcel of the marketing process as many sellers and landlords expect the  agent to harness their database to effectively market the clients property to an instantaneous audience, and rightly so. There are agencies in the UK who credit almost eighty percent of their deals now being finalised through WhatsApp and other social media communication platforms.

The integration and feeding of saved contacts and social media connections to a singular mobile device has propelled client service into the spotlight and the necessity for agents to be trained and educated on continuous feedback and prompt customer service.

Many of our agents are now introducing WhatsApp marketing plans into their mandate  strategies. There are without a doubt many advantages to these applications these applications. They are very user friendly when sending media such as videos, photographs and embedded links to inquiring clients, which make them perfect for real estate communication. The WhatsApp status for instance allows agents to market homes to a growing mobile database without contacting prospective buyers individually. This strategy is becoming very popular on multiple platforms as a subtle non-invasive arm of a real estate marketing plan.

With WhatsApp being owned by Facebook and Instagram it is no wonder this tool has the ability to cross pollinate communication and diversify it into a multi pronged communication force.

It certainly is exciting times and at Harcourts we embrace innovation, especially when it benefits our clients. Our marketing plans are always evolving to include new digital strategies to ensure our clients needs are met and that we are effective in implementing our strategies.

Statement by
Richard Gray
Harcourts Africa Chief Executive Officer

African technology developments aim to boost online economic activity

The global push by international technology brands to invest in the development and accessibility of emerging markets will be a key driver for future economic growth. We’ve seen how on a global scale development in these spheres can make positive contributions to alleviate unemployment and boost entrepreneurship.

These development strategies will undoubtedly translate into increased consumer spending online. In the past few years we’ve noticed a significant increase in the amount of users shopping for property on our digital portals. The advancement of these functionalities are evolving rapidly and are making major strides toward consumer convenience. The advent of Augmented and Virtual reality technology where you’re able to view a property listing in 3D in the comfort of your home or your mobile phone in a queue at the post office is more readily available.

Similarly we’re finding that client and agent communication is occurring more frequently on digital channels, which include our highly advanced user friendly Harcourts websites, social media channels and other mobile social apps. Harcourts invests greatly in technology and recently we became one of the first real estate companies, globally, to take advantage of and build our own member-facing app store on Apple’s Developer Enterprise Program.

As consumers become more comfortable with online purchasing, especially with the continuous evolution in the banking industry and development of mobile apps, we’ll see that filter to other industries. It is incredibly important for Government and corporate leaders to embrace these market changes to not only use it for their own client convenience but to advance the usage thereof for holistic growth purposes.

The more entrepreneurs entering the marketplace the better chance we have of increasing employment opportunities which benefits everyone, especially those who need it most. That is why internet connectivity is so crucial to this process as trading with technology can impact the success of a small business in a very direct manner over the short term.

Statement by

Richard Gray

Harcourts Africa Chief Executive Officer

Interest rate cut: The break SA consumers need

Harcourts South Africa welcomes the announcement by the South African Reserve Bank that interest rates will be cut by 25 basis points. This is the first easing in policy in over a year and in a time when many South Africans are feeling the pressure this comes as welcomed relief. Especially considering that many economists are predicting another cut later in the year.

It is absolutely necessary that our consumers are able to alleviate some pressure and that sentiments are boosted to in turn help the sluggish economy. Activity in the real estate market has been on the decline in some segments and we’re hoping this relief will reignite investment activity.

Although it is only a quarter of a percent, any financial breaks in the current economic climate is a step in the right direction.

The people have been carrying the burden of an ailing economy and ever-rising costs for quite some time now and in order for us to turn this economy around and institute sustainable growth economic participation has to increase.

Statement by
Richard Gray
Harcourts Africa Chief Executive Officer

Buying vs Building – which is more financially viable?

The FNB Property Barometer for 2019 indicated a low 3.7% year-on-year growth in Feb this year, compared to the 4.2% year-on-year CPI for the same period and the 3.8% annual average recorded in 2018. This slow growth coupled with a potential sentiment boost following the recent election results, might lead to a buyer’s market emerging across the greater part of SA.

This is according to Sheldon Jennings, Architect and founder of Archimedes Design – an innovative architecture practice in SA, who says that the first consideration for first-time home seekers should be whether to buy a pre-existing home or take up the challenge of building a tailor-made family home.

“Selecting the most financially viable option that can also serve practical lifestyle requirements is usually a deciding factor for first time home-seekers looking to acquire a family home. Unfortunately, there is no cut and dry answer when it comes to deciding whether to build or buy. From city to city the cost of construction and land vary vastly, and one needs to decide on a case-by case basis.”

Jennings identifies the following pros and cons for each of the options:

Buying a property

Purchasing a property could yield less unforeseen costs, provided that a comprehensive property inspection is conducted prior to the offer being made. Think about it as if buying a second-hand car versus a new car. As is the case with purchasing a second-hand car there are many hidden expenses that might creep up down the line, such as maintenance on individual elements that have suffered wear-and-tear. Common examples would be broken or cracked tiles, corroded roof sheeting that cause leaks and even foundation settlement that may compromise the structural integrity of the building.

Buyers must also be very sure to scrutinise the council approved building plans – which should be provided by the property agent – against the existing structure on the property. In some cases, the current owners may have added a bedroom, entertainment area or second dwelling without attaining the necessary council approval. In these instances, the new owners may be liable for hefty fines of up to 100% of the building costs of the illegal structure and in worst case scenarios where local building regulations were not adhered to, council has the right to issue a demotion certificate for illegal parts of the building. As most buildings are sold voetstoots in SA – costs that arise as a result of these penalties will likely fall on the shoulders of the buyer alone.

There are several property inspection firms in SA who conduct these pre-purchase inspections, but Jennings advises going with a firm that employs professional architects or engineers to ensure that the inspection is of the highest quality and to provide credibility, should the buyer wish to utilise the report for a potential discount on the asking price.

On a more positive note, a key benefit of buying a ready-built home is that you don’t have to go through the many stresses and the extended timeline generally associated with building. From transfer of property to council approval, the timeline of the entire construction process can easily exceed six months and can take even longer if unexpected hick-ups arise.

For individuals who are not prepared to go the extra mile and who do not have the time and capacity to invest in the construction process, it may be better to opt for buying, which generally concludes in under six months and where you essentially pay a team of advisors and professional consultants to guide you through the process and perform a lot of the admin on your behalf.

Building a home

Jennings explains that while a key benefit of building a property is the autonomy it offers the purchaser to create a truly novel and tailor-made space for his / her family, the process is not without its own pitfalls.

When building there could also arise unforeseen costs, such as special levies that apply depending on factors such as elevation above natural ground level, or if a second dwelling will be added to the property for example. Many first-time developers forget to add some hidden fees into their initial cost estimate. While they may have accounted for the professional consultants’ fees such as the architect, engineer and the construction team – they might neglect crucial items such as the geotechnical survey, (which helps to establish the subsurface soil and water conditions that influence the structural design) or development levies payable to the city.

Another hidden issue to be aware of is the potential for subsurface boulders that may need to be removed at great expense and effort. Additional elements that contribute to the cost of construction – such as steel reinforcement in the foundations – might also need to be added if the soil is found to have a high clay and water content following a geotechnical survey.

On the other hand, a Geotechnical survey might reveal ideal building conditions and therefore lessen the overall expected cost of construction. When building with a qualified team the client can at least have peace of mind that the building’s structural integrity is intact and that there are no hidden flaws or latent defects that will plague them down the line.

It is therefore always advised to consult with an architect before purchasing a piece of land to develop. Remember that the home you envision is not always possible. Elements such as height restrictions, boundary lines and aesthetic finishes are usually determined by the local council and it is important to be aware of these in order to have a realistic idea of what the finished product you envision on your new piece of land will look like.

Jennings advises that many architecture practices, including Archimedes Design, waves consultation fees if the buyer decides to continue with the purchase and appoints the firm for the design process. If the buyer is seriously considering a purchase it is a worthwhile exercise to ensure that the right decision in made, with all the right information at hand.

He concludes that building a custom design that is tailored to your family’s unique lifestyle requirements is usually a bit more effort, but it can be very cost effective, and it is usually worth it.

“One thing is for certain, if a client is willing to go through a little extra effort, one can create a unique space to enjoy with friends and family that need not cost as much as purchasing a pre-existing home and renovating. More often than not we see greater long term satisfaction with a home that has been built specifically to cater to a client’s need, rather than a purchased home.”