Water pass garri is a very apt way to describe the housing finance situation in Nigeria. The Managing Director of the Federal Mortgage Bank at a recent industry event mentioned that since inception in 1973, the FMBN has funded 18,935 mortgages at a total cost of N193.4 billion.
To put things in context, Nigeria has a mortgage to GDP ratio of circa 0.6%, which is puny, compared to our regional nephew; Ghana which stands at 2%, and very abysmal when viewed against south Africa with a 31% ratio. Clearly, while the mortgage industry has been around for nearly half a century, it has not shed its nascence.
The obvious question then is; if the mortgage industry is so underdeveloped, how have Nigerians been acquiring homes?
Available data suggests that over 90% of homes in Nigeria are acquired by incremental building. This is analogous to buying a car in parts; one tire today, a carburetor in six months and a pair of seat belts a while later.
However, as grossly inefficient as this method of home acquisition is, given the very high interest rates for mortgages, it is by far the more practical, and affordable option open to most Nigerians.
In light of the pittance that the FMBN brings into the housing finance pool, the effective mortgage interest rates in Nigeria which ranges from 15% – 22% will make even soulless loan sharks in more advanced economies drool with longing. So, why isn’t capital flowing, as it should in the direction of the greatest return?
Why isn’t the Nigerian mortgage sector awash with patient international capital in pursuit of the clearly higher returns that can be made?
There is a long list of reasons but these three are perhaps most critical. Firstly, the significant foreign exchange risk associated with volatile frontier markets; secondly, the fact that capital is mostly sector agnostic, and so even if it comes into Nigeria,
it would probably go into sectors with less risk, and greater asset liquidity; and thirdly, the often ignored fact that in spite of the touted housing deficit figures, the high poverty rate in the country means that there is actually very little effective demand for housing.
Since pulling oneself up by the bootstraps is in reality a rare miracle or a freak accident, how else might we succeed at the more practical matter of attracting capital into the mortgage sector?
Apparently, our current macro-economic and policy environment makes it difficult to pull in patient institutional capital.
Consequently, it will be useful to explore other avenues for attracting capital that are relatively cheap, and somewhat patient.
One such vein of capital can be diaspora remittances. Most recent data indicates that annual remittances through formal channels amounts to about $25billion.
A useful backdrop against which to view this figure is the total mortgage loans generated by FMBN in its nearly half a century of operation; 193 Billion i.e$0.5billion.
Clearly, given the right policy, and legislative framework, and a conscientious marketing programme, the Nigerian Diaspora can with a tiny fraction (2%) of their annual remittances, equal FMBN 50 year performance.
A recently conducted research into short-let apartments in the commercial real estate space of property market in Lagos indicates that the need for short-let apartments has maintained an upward trend in spite of the current challenging economic situation in the country.
This increased demand has spurred savvy business operators to accelerate their expansion plans in 2018 by seeking out strategically located residential buildings or vacant apartments in prime areas to be converted into short-let apartments to meet the flexible needs of people who require such accommodation.
Rethinking and re-ordering of priorities by multi-national corporations who now prefer to keep their expatriate workers in short-let apartments instead of full-scale residential accommodation, is a major driver of this rising demand.
“One factor that has led to the increase in this sector is the upsurge in demand by corporates who would rather pay for short-let apartments for their expatriate staff as opposed to paying annual apartment rentals,” Erejuwa Gbadebo, CEO, International Real Estate Partners, IREP, confirmed
Another major driver of this new trend is tourism, especially religious tourism which is growing in multiples in Nigeria with people looking for ‘miracle’ trooping into major cities, especially Lagos, on daily basis. The new trend, therefore, presents investment opportunity for real estate investors and developers.
The rental range for short-let apartments is wide and depends on the quality, branding, unit size and location of the offer. Rents can go as low as N25,000.00 for a studio apartment to as high as N140,000 per day for a three-bed apartment.
“The commercial outlook for short-let apartments remains attractive in light of positive market fundamentals, expansion possibilities and strong levels of profitability.
We believe this market presents unlimited opportunities and is a sector likely to spur increased investor interest,” Gbadebo posited.
At global level, the hospitality industry is said to be one of the world’s largest. A new report estimates the value of the industry to be in excess of $7.6 trillion in 2016 and is expected to reach $11.5 trillion by 2027; 32 per cent of projects under development in Africa are in the Western countries, currently home to just seven per cent of the existing supply.
Most of these projects are in Nigeria, primarily in Lagos and Abuja, where projects spend longer in the pipeline phase than in most other African countries.
The new report notes that the economic recovery in Nigeria saw the number of room nights sold in Lagos increase by 17.6 per cent with the tourism sector contributing $2.2 billion to the state’s GDP in 2017.
Despite the security challenges in many quarters, hoteliers continue to consider Nigeria an important market for the West Africa region, seeing that supply remains grossly unrepresentative in comparison to population and perceived demand.
Across the nation, more infrastructure projects were awarded to Asian firms, increasing the number of Chinese consultants, workers and family members who need to shuttle between home and Nigeria.
This also increased the demand for hotel accommodation, guesthouses and relaxation spots, creating investment opportunities for space providers.
Access to adequate housing for low-income earners is a critical development issue globally. A safe and stable home is the first step to a productive, healthy life. Yet owning a home is beyond the reach of the vast majority.
In sub-Saharan Africa, the poor have very limited access to long-term financing for housing, which is almost invariably limited to commercial banks offering formal, multiyear mortgages.
Only2.4 percent of the Kenyan population, for example, is able to afford typical loan rates. At the end of December 2018, there were only26,187 active conventional mortgages in the whole country — the majority of which were granted to urban professionals.
In Uganda, which has a population of 42.8 million, the number was just5,000 in 2018.
“We are continuously exploring and innovating our approach to address additional dimensions of the housing crisis and encourage others to do the same.
Housing microfinance allows low-income families to improve their housing incrementally, as they can afford it. Through access to housing microfinance, households in sub-Saharan Africa can improve their housing and their quality of life.
That is the key finding of evaluations of a recently concluded six-year project in Kenya and Uganda.
Microfinance at work
Building Assets, Unlocking Access
The partnership between Habitat for Humanity and the Mastercard Foundation is aimed at making an impact on housing in Africa by enabling existing financial service providers to design housing microfinance products and housing support services that can be accessed by low-income families to use in the incremental improvement of their homes.
The objective of the project was to develop scalable and innovative housing microfinance to be replicated by other financial service providers in sub-Saharan Africa.
The project has enabled over 70,000 households to access housing microfinance products improving their shelter, living conditions, and social well-being.
The participating institutions offered loans of $30-10,000 for improvements such as adding an extension, toilet or running water; finishing a roof; adding insulation; as well as for constructing a new home.
These products were designed for the vast majority of the population who live in substandard accommodation and are locked out of formal housing finance.
These households may possess a firm desire to improve their living circumstances and prospects, but can only afford to do so incrementally.
In Kenya, a study found that low-income women who took up the Nyumba Smart Loan offered by the Kenya Women Microfinance Bank used it to improve roofs and walls.
Nearly 30 percent expanded their homes, and around 9 percent built separate kitchens, As a result, overall housing satisfaction rose by almost 15 percentage points over just a one-year period.
In Uganda, the study found that the existing quality level of housing was already comparably higher than in Kenya. However, a 20 percentage point increase of clients used their loans to build separate kitchens. Overall housing satisfaction rose by 30 percentage points.
In addition, the improvements made by Uganda borrowers were not confined to their own homes, but frequently applied toward development or improvement of rental units.
These rental units contributed to increased income for borrowers — an unanticipated dynamic in our study and a fact that addresses the key concern many have that housing microfinance diverts funds and resources away from income-generating activities.
Improved homes mean better health outcomes too. In children younger than 6 in Kenya, significant decreases were found in vomiting, sore throats, and rashes, all illnesses associated with allergies and poor environment.
In Uganda, however, these health improvements were not observed, with evaluators noting that it can take time for health indicators to become evident.
Janet Maritim, a farmer in Bomet, western Kenya, said: “It has been a huge relief not to worry about the health of our children. In the old house, the cold air that ran through the rooms always made me fear that a flu would turn into a serious illness like pneumonia. It makes me happy to see the children thrive.”
Jane Migare-Miluka waited seven years for new housing to be completed. When it finally was, her name was not on the list of residents.
This is part of our six-piece Failed Aid series, which investigates citizen reports on failed or unfinished aid projects in Africa.
Improved housing can have a positive effect on children’s education, offering more space in which to study and making them less likely to miss school due to sickness.
Though it was too early for such factors to show up meaningfully in the survey, many respondents expressed delight with the impact their home improvements were having on their children.
Better housing also generated greater self-esteem and dignity for families. Shalifa Namaddu, a 28-year-old single mother with two children from Lyantonde, southern Uganda said: “I am more confident and have become a respected member of the local community.
People admire me for what I have achieved, and it makes me very proud when they ask for my advice.” Namaddu, who runs her own general store, has already taken out four loans with the Centenary Bank, and is planning a fifth to complete the house by adding an indoor toilet.
The business case for housing microfinance
Not only does housing microfinance align with the social mission of many microfinance institutions, it also makes financial sense, with47 percent of institutions saying such loans have relatively the same profitability as more conventional microfinance loans, such as those for business or farming.
The sustainability of these products will carry the impact of improved housing forward and the market is demanding more progress in this sector, as indicated by the recent announcement of $26 billion in investment pledges for housing in Kenya.
Two of the key partnering banks — KWFT and Centenary Bank — are posed to disburse an additional 50,000 housing microfinance loans or so over the next 12 months.
There are obstacles, of course. Other financial institutions will need long-term funding and guidance as they learn how to develop, market, and manage housing microfinance products for their markets.
To expand the product, institutions will need to identify adequate sources of long-term funding. Each market is different, and attention will need to be paid to designing loan products that suit local characteristics.
Also, awareness of the housing microfinance concept is still low. With skeptical looks, people ask me what this small-loan, incremental approach looks like in practice.
The findings of these evaluations are a great step forward in addressing the skepticism and understanding the real impacts.
We are committed to sharing the opportunity that these products present for improvements in low-income housing. I am convinced this can become a major sector in the continent and do a great deal to relieve frequently poor housing conditions.
When I discuss what we have done in Uganda and Kenya at conferences and forums, I realize that this is but one part of a larger housing market dilemma.
We are continuously exploring and innovating our approach to address additional dimensions of the housing crisis and encourage others to do the same.
The new Homeownership Support Team will assist tenants in handling homeownership policies and processes.
Households living in HDB rental flats can look forward to getting stronger and personalised support from the Housing Board, which plans to create a team dedicated to helping such families become homeowners, reported Channel NewsAsia.
“We agree that public rental should only be temporary for tenants who are work-capable.” Hence, the government is increasing support to help tenants become homeowners, said Senior Parliamentary Secretary for National Development Sun Xueling on Tuesday (5 Mar).
To be established later this year, the Homeownership Support Team (HST) will assist tenants in handling homeownership policies and processes. The help on offer may include guiding them through the transaction, help in choosing a home that can meet their budget and needs, as well as monitoring cases to ensure households get their keys.
The support team aims to help 1,000 families in the next four to five years, said a HDB representative, adding that the agency currently counsels tenants to consider buying a flat instead of renting one when they renew their tenancy.
Moreover, Sun revealed that HDB gained a “better understanding” on how to provide better assistance to tenants thanks to the Fresh Start Housing Scheme, whereby families can obtain a grant of up to $35,000. Implemented in 2016, this programme assists second-timer rental families with kids purchase a two-room flat.
“We have learnt that having someone to consult, and more importantly, to provide the human touch, is important for our tenants.”
For example, some families needed advice on budgeting to be able to buy a flat, while others said they were grateful for the face-to-face support provided by the Fresh Start team.
In February, Sun noted that 74 families enrolled in the scheme, of which five have already collected the keys to their flats.
“These numbers may seem small, but for those who benefit from the scheme, the help provided means a lot and we want them to succeed in their home ownership journey,” she explained.
Sun added that the number of rental households moving up the property ladder has increased steadily over the last few years, with around 1,300 rental households successfully levelling up to homeownership in 2018.
In addition to making an informed decision, property buyers are also working out the best mode of acquiring their immovable assets.
Whether it’s choosing the best financing option for tax benefits or directly dealing with the seller to avoid brokerage, Indians are leaving no stone unturned.
One such smart way is the decision to register the property jointly, with the spouse.
There are intangible benefits of joint registration of property like elevating the status of the wife in a patriarchal society, better bonding, long-term commitment, and trust between spouses. However, not many are aware of the financial advantages.
Loan options for couples
The budget to purchase property is determined by the loan eligibility, which has a specific limit depending on the income. In case of a joint registration, spouses can opt for a joint home loan.
It shares the debt burden between two people and paves the way for a higher loan amount as two incomes will be considered
A joint home loan can be obtained by an applicant along with their spouse, parents or siblings.
Tax benefits for co-borrowers
According to Suraj Nangia, partner, Nangia & Co., “From a taxation point of view, a joint home loan is beneficial to all co-borrowers who can claim a tax deduction of Rs 1.50 lakhs for principal repayment under Sec 80C and Rs 2 lakhs for interest payment under Sec 24.
In the case of two or more people taking a joint home loan, each of them can enjoy tax benefits under the Income-tax Act, in respect of the principal and interest paid during a year, on proportionate basis.”
Under section 80C, each joint owner is allowed a deduction of Rs 1,50,000 for principal repayment. They can also claim deduction on the registration charges and stamp duty charges that they have paid for, with total deduction not exceeding Rs 1,50,000.
Additionally, they can also apply for deduction of housing loan interest from house property income, up to Rs 2,00,000 each. However, the deduction should not exceed the interest.
Stamp duty benefits for women
Delhi, UP, Punjab, Haryana and Rajasthan, offer relaxations in stamp duty for women buyers. Punjab reduced the stamp duty charges from nine per cent to six per cent in 2017, for a limited period.
It maintained that from April 1, 2019, urban areas would again invoke a stamp duty charge of nine per cent and the same would be six per cent in rural areas.
The stamp duty rate in Maharashtra, which was recently increased to six per cent from the previous five per cent, is uniform for both, men and women. However, the other states where stamp duty rates are lower for women include:
Only Re 1
6% in rural8% in urban
4% in rural6% in urban
Rebate of Rs 10,000 on overall charges
5% in rural6% in Urban
(Plus 1% if property cost >Rs 40 lakh)
Note: List is not exhaustive – charges are indicative and subject to change.
Additionally, many banks such as SBI, HDFC, ICICI, etc., offer discounts on home loan interest rates to women as compared to men. This varies from bank to bank and goes up to nearly one per cent.
In the case of single ownership, transfer of property can be lengthy and time consuming.For instance, after the death of a New Delhi resident, his family members found that the flat they lived in, was solely owned by the deceased. The procedure to get the documents in the successor’s name involved excessive conformation to regulations and rules.
“Many people suggested shortcuts involving unethical practices. Finally, my sister took possession of the property after extensive paperwork, mental torture and time,” recounts the brother-in-law of the deceased.
If only the property was jointly owned, these hassles could have been avoided.
“Joint registration of property is always advisable as the spouse is always the successor. This will prevent unwarranted problems in the future after the demise of any person,” explains advocate Narendra Vishnu Sankpal, RV Sankpal & Associates
Retirement homes, earlier looked upon with disdain, are now gaining greater acceptance. Children of aged parents often, live away from their family.
They are happier to have their parents living in safe retirement homes, in the company of people of the same age group, and where many of their daily needs are taken care of.
The family’s original home can be sold off to generate cash to buy a smaller retirement home, and to fund the parents’ living expenses. However, the decision to buy a retirement home should be taken with due care. Here is what you need to know:
Choose the right developer for a retirement home
Invest with a developer who has prior experience of running such a complex. “Running a senior living complex involves both, hard and soft issues,” points out Vishal Gupta, managing director, Ashiana Housing.
“Developing the real estate and selling it is the easy part. The hard part is providing all the promised activities: a high standard of service and removing the myriad irritants in the residents’ lives.
This is where the challenge arises because there is not so much money to be made in the maintenance and service aspects of such a project,” Gupta adds.
Sometimes, builders rebrand their projects in remote areas that are not selling. “Such developers, who are not committed to the concept, may not be able to offer the high level of service and maintenance standards required in such a complex,” warns Gupta. Therefore, avoid developers who are undertaking one-off retirement projects.
Location of a retirement home
Most retirement homes are situated on the outskirts of cities or in remote locations. Land is cheaper there and hence, the developer can buy the vast tracts of land necessary for such a project.
Such areas also offer the necessary peace and quiet. However, make sure that the place is connected well to the city by a highway or some form of public transport.
This will make it easier for you to travel to the city whenever the need arises, and for your relatives to visit you. A large hospital should be situated within half an hour’s drive to take care of health-related emergencies.
Payment modes for retirement homes
The first and most common option is an outright purchase. The advantage of such an option is to be able to pass on the home to your children, though they may only be able to live there after they are 50 or 55.
You can also sell the home if you move out and take advantage of the accrued capital appreciation.
However, this is an expensive option and a large portion of your retirement savings could get locked up in the purchase of the house. This could lead to a cash crunch in later years.
Under the upfront deposit model, you pay 60-80% of the cost of the house. You live in the house for a certain period after which you move out. When you do so, the deposit is returned after deducting certain charges. Under this model, your upfront costs are lower.
So, you have more cash in hand to manage the day-to-day expenses. However, a premature exit before the specified time may be difficult.
The original house
Keeping the original house offers the flexibility to return, if you don’t happen to like living in a retirement home. However, as Vishal Dhawan, chief financial planner, Plan Ahead Wealth Advisors, points out,
“Sometimes, the decision to keep two homes means that you become asset rich but do not have enough money to meet your day-to-day expenses.”
Celebrating International Women’s Day on March 8, Habitat for Humanity and Lowe’s unite hundreds of volunteers to build and repair homes internationally while spotlighting women’s voices on global affordable housing needs
Habitat for Humanity, Lowe’s and hundreds of women volunteers will unite in 18 communities in the United States, India and Canada for the first International Women Build Day, a global event focused on building and improving homes while raising awareness of affordable housing issues facing women and their families. The build day is also a tribute to International Women’s Day, March 8.
“Homeownership empowers women here in the United States and around the world. Owning an affordable home can remove barriers to opportunity and success and lead to improved health, stronger childhood development and financial stability,” said Tjada McKenna, Chief Operating Officer, Habitat for Humanity International. “Women have the power to make remarkable changes within their communities. That’s why we are excited to partner with Lowe’s in bringing together women from all walks of life for an opportunity to lift each other up, learn from one another and join together in building a safe and decent place to call home.”
For many, the ability to own and afford a home is an unattainable dream, and the issue of affordable housing is a growing global issue.
“Countless women struggle to provide shelter for their families. Even in the United States, nearly 19 million households spend half or more of their income on a place to live,” said Jennifer Weber, Executive Vice President and Lowe’s Foundation Chair. “Too many families must decide between housing and other critical needs, such as food, health care, childcare, education and reliable transportation. We stand with Habitat for Humanity on International Women’s Day to empower women to share their stories through messages of optimism and action to support safe and affordable housing.”
In Canada, 1 in 8 households do not meet the country’s core housing standards of adequacy, suitability or affordability. In India, the urban housing shortage stands at 18.78 million units, out of which about 96 percent is considered in the Economically Weaker Section and Low Income Group categories.
Since 2008, Lowe’s has supported Habitat’s Women Build program in the U.S. and has helped build, renovate or repair 5,290 homes. This year, recognizing the global need for affordable housing, Lowe’s is expanding its support to help build homes in Montreal, Canada; and Bangalore, India. U.S. events include: Charlotte and Lake Norman, North Carolina; Washington, D.C.; Seattle; Nashville, Tennessee; Los Angeles; Philadelphia; Austin, Houston and Fort Worth, Texas; Albuquerque, New Mexico; Indianapolis; Phoenix; Boston; and Orlando and Tampa, Florida. Combined, volunteers will help build or repair 30 homes in three countries.
Lowe’s partnership with Habitat began in 2003 and since then, the company has committed more than $65 million to support the housing nonprofit.
To learn more, visit habitat.org/womenbuild or follow #WomenBuild on social media to share and view stories from around the world.
About Habitat for Humanity Driven by the vision that everyone needs a decent place to live, Habitat for Humanity began in 1976 as a grassroots effort on a community farm in southern Georgia. The Christian housing organization has since grown to become a leading global nonprofit working in local communities across all 50 states in the U.S. and in more than 70 countries. Families and individuals in need of a hand up partner with Habitat for Humanity to build or improve a place they can call home. Habitat homeowners help build their own homes alongside volunteers and pay an affordable mortgage. Through financial support, volunteering or adding a voice to support affordable housing, everyone can help families achieve the strength, stability and self-reliance they need to build better lives for themselves. Through shelter, we empower. To learn more, visit habitat.org.
About Lowe’s Lowe’s Companies, Inc. (NYSE: LOW) is a FORTUNE® 50 home improvement company serving more than 18 million customers a week in the United States, Canada and Mexico. With fiscal year 2018 sales of $71.3 billion, Lowe’s and its related businesses operate or service more than 2,200 home improvement and hardware stores and employ approximately 300,000 associates. Founded in 1946 and based in Mooresville, N.C., Lowe’s supports its hometown Charlotte region and all communities it serves through programs focused on safe, affordable housing and careers in the skilled trades. For more information, visit Lowes.com.
The desire of President George M. Weah to transform the lives of rural inhabitants in terms of their dwelling places has come to fruition, as construction work has commenced on the much needful Pro-poor Housing units project in Grand Kru County.
For a pilot phase, 8 communities making up Sass Town are benefitting from 282 modern houses which construction got underway over the weekend.
Under this Pro-poor Housing project of President Weah, Liberians will breathe a sigh of relief, as each beneficiary will soon move into a modern house fitted with modern accommodation facilities.
From the foundation of Liberia, rural inhabitants forming integral part of the Country’s citizenry have had to make do with thatch-roof mud-houses for a home, a clear demonstration of poverty.
According to President Weah, this is unacceptable and figuring out something to positively turn the corner was a patriotic imperative for him to put smiles on the faces of Liberians in the remotest of dwelling location.
After Sass Town, other communities in Grand Kru as well as other counties are poised to benefit from this housing units project.
The Liberia Agency for Community Empowerment (LACE), headed by Quiwu Yeke, is implementing the project.
The Agency is utilizing the wealth ranking evaluation system to determine who gets the houses.
Only the poorest of the poor is qualified to benefit, according to project selection criteria.
Experienced social worker, Harris G. Zumoh, Jr., is supervising the Presidential Special Housing Project (PSP) at LACE.
He is quoted as saying in order to give the beneficiary communities a new face, old housing structures of beneficiaries will be broken down, a precondition they have accepted.
But LACE said the demolition will be effected only when keys to a beneficiary’s new home are ready to be handed to them (meaning climax of construction work).
Even though President Weah’s quarter or community in Sass Town is Felorkli, the construction work started in Mansonklegbe, a small community.
Citizens of Grand Kru County are said to be excited about the construction of the pro-poor housing units, which they believe, will help to transform their lives.
They said over the years, past governments did not do much to ensure that they benefit from the country’s resources.
The citizens praised President Weah for taking his government to them by undertaking projects that have direct impact on them.
“We now know that we have a government that cares for its citizens irrespective of their localities,” a classroom teacher in the county said.
With house prices have risen over the last decade, many young people have found it tough to get on the property ladder. Some are choosing to co-buy with friends, but it is not without its risks.
Courtney McClure is buying a six-bedroom house with her husband Alex and another couple in south London.
The deal is almost complete and the group is excited to make the property in Sydenham, which has a large garden and big communal spaces, their own.
Pooling their resources with another couple has enabled them to buy in a “much more appealing” location with better transport links than if they had bought a place separately, Courtney says.
“We’re getting a lot more for our money,” adds Alex, a 32-year-old sound engineer.
But money should never be the sole motivation to buy with friends, Courtney says. “It’s such a big thing. You’re sharing your world. I think if you were just doing it for cost reasons, you probably wouldn’t enjoy it.”
Her view is echoed by Lucy Jordan who believes buying property with friends, or co-buying is “the answer”.
Not only is it a wise choice financially, it is also the “best option”, because “people are better off living in groups”, she says.
“People are trying to decide how best to make the most of their lives,” says Lucy, who currently lives in Harlesden, north London. For her this means buying a property in or near Dover, with her partner and four friends.
The group has not laid their eyes on any particular places, but Lucy says: “We’re all quite passionate about it. It’s definitely the way we’re going to go.”
Are more people doing this?
M&S Bank believes there has been an increase in people co-buying. Last year it launched a “mortgage for four”, following research it says showed that the “majority of millennials would take out a mortgage with two or more people to get a foot on the property ladder”.
“The option of becoming a mortgage-mate is particularly appealing to those already in a housemate arrangement, and our research shows that the concept has become increasingly popular with millennials,” Paul Stokes, head of products at M&S Bank, said.
Mortgage brokers London & Country have detected a small increase in applications by groups of three or four, but spokesman David Hollingworth says this increase does not capture mortgages taken out by two friends, for example, and does not make clear if applicants have “parental backing”.
Though the phenomenon might be on the up, Alex McClure says when he and his co-buyers approached estate agents, “a lot of them seemed quite surprised – I think it’s still considered abnormal.”
Not all lenders offer group mortgages either. Nationwide, one of the UK’s largest mortgage lenders, for example, currently has a maximum of two people per mortgage.
What about the risks?
London & Country’s David Hollingworth warns that if one co-buyer wants to move on, this could create a situation where the “other co-buyers would either have to buy them out or if they can’t afford that, be faced with the prospect of selling the property”.
Even if four people’s names are on a mortgage, if one or more stop paying, the mortgage lender has the right to demand full repayments from whoever they can reach, he explains.
Sean Gilbert, a 40-year-old flooring contractor from Bedfordshire, says co-buying is “insanely risky”.
He now lives in his 16th rented property since leaving school but says house prices have been “artificially inflated” by the buy-to-let market, and he is “resigned to never owning”.
But he would never consider co-buying. “There are virtually zero legal safeguards if someone wants to up and leave, taking their capital with them.”
‘In it together’
Lucy Jordan, however, has “complete trust” in her group.
“We’re all incredibly close, and if something were to happen that would mean one of us would become financially insolvent, I would want to support them. We’re all in it together. I see us more as a family,” she says.
There are, however, some ways to formalise co-buyers’ obligations towards each other.
The McClures and their co-buyers have drawn up a deed of trust, which is a legal agreement used to specify how a property is held between its joint owners.
It sets out steps the group would take “if someone wants out”, Courtney explains.
“I don’t think anyone will have any hard feelings if someone is really honest and says, ‘I really hate this,’ and I think it’s better to do that and stay friends than put up with a terrible situation,” she adds.
For now though, the group of friends are excited to move in together – with one couple on each floor, and sharing the cost of any renovation and possibly childcare in a few years time.
In complex, protracted transactions like property sales, delays are not only frustrating, they can also be extremely costly and may even torpedo the deal completely. However, while some delays cannot be foreseen, it’s possible to exponentially reduce the risk by doing one’s homework and having all one’s ducks in a row from the onset.
This is according to Jill Lloyd, veteran agent and Area Specialist in Rondebosch and Claremont for Lew Geffen Sotheby’s International Realty, who says: “Essentially there are two primary types of delay; the first relating to the confirmation of the sale and those that occur once the sale has been confirmed and hold up the transfer.
“Property transactions are known to be lengthy processes with multiple steps and reams of documentation, and once the potential minefield of suspensive conditions and contractual obligations has been successfully navigated and the deal is finally done, many people breathe a sigh of relief. But the expected downhill cruise to transfer can still become an uphill battle if one isn’t careful.”
Lloyd explains how this can happen:
“One of the main reasons for delayed transfers is that the timeline is out of sync, especially when two or more deals are linked and money from one sale is needed to purchase the next property and so on. I once brokered a transaction with seven linked deals all dependent on the sale of a Rondebosch East home and we had to pull out all the stops to get the house sold in time.
“It is also very important for buyers to budget for the transfer costs of the new property they are buying or have an access bond in place on their current home, otherwise when the attorney calls for bond cancellation that bond account will be frozen and they will not be able to access the funds.”
She adds that not giving the required 90 days’ notice of cancellation of the existing bond can also cause delays as well as avoidable late cancellation fees.
“If a homeowner is seriously thinking about selling, they should give notice to the bank holding the bond. In doing so, they are not committing to selling, merely notifying the bank of the possibility and they can keep on renewing the cancellation if they don’t sell timeously or revoke the notification if they change their minds.”
Craig Guthrie, Partner at Guthrie Colananni Attorneys says: “One of the transferring attorney’s key roles is to coordinate and control all the role players involved in a transfer, including SARS (transfer duty), the municipality (Rates Clearance Certificate) and the bank.
In order to do this as seamlessly as possible, it is essential that both the buyer and seller submit all the necessary documentation in time, as per the legal requirements and without omissions. This is especially important if either party resides in another country or is otherwise difficult to contact for information and signatures.
Guthrie says that although hiccups and stumbling blocks can occur at any point of the transaction, they most commonly occur at the following stages:
The signing of transfer documents
Obtaining valid compliance certificates
Issues encountered at lodgements requiring the removal of notes by the Registrar of Deeds
Transfers which are unusual and more complex, such as estate transfers which require an endorsement of the Master of the High Court, which can cause a delay
Most of these delays can easily be avoided, through prompt co-operation with the transferring attorney and the paralegal handling their transfer or, if they are outside of South Africa, by giving a valid power of attorney to a person within South Africa who can sign the necessary documents and act on their behalf.
“It’s vital that the client is completely up front with the agent regarding their financial situation,” says Lloyd. “We can then facilitate and expedite the process by having our bond broker at ooba, South Africa’s largest mortgage originator, prequalify them and the thorough credit check will reveal any potential snags.
“This step is particularly important for buyers who are self-employed as banks are very strict about the documentation that they require for a bond application. At this stage I always advise all my clients to avoid making any expensive purchases that could negatively impact their affordability.”
Lloyd concludes: “Experienced estate agents will guide their clients every step of the way and as long as they are upfront with their realtors, there should not be too many problems to circumvent.
“I also recommend appointing an accomplished conveyancing attorney who is really on the ball. It is all very well allowing your best friend to handle the transfer, but you could end up being enemies if they make a complete hash of it and that happens more often than I like to remember!
“And, as the transferring attorney and agent work closely together behind the scenes to ensure a smooth transfer, it is always an advantage if they already have an established working relationship.”