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Consumer Study: Housing And The Consumer

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1. The repo rate is the rate/ratio that the central bank lends money to the commercial banks. The repo rate is currently 6.5%.

1.1 The prime lending rate is currently 10%, and it is the interest charged by banks to clients (based off the repo rate).

1.2 The Prime lending rate is currently 10%.

2. The ‘housing 30% percent rule’ advises that you don’t spend more that 30% of your gross income on housing costs. So, if you’re a tenant that 30% will be the rent and utilities, and if you’re an owner that will include mortgage costs, maintenance and property taxes. That means that Tim and Sandy should keep their total house building and maintenance costs under 30% of their joint gross income. As this will ensure they don’t go bankrupt or become overly ‘cost-burdened’.

2.1 (R30 000 + R40 000) x 0.30 = R21 000

They will have R21 000 available for their monthly housing costs.

2.2 R21 000 – R1500 – R500 – R1500 = R17 500 will be left to spend on a monthly home loan

2.3 R17 500 + R1500 + R500 + R1500 = R21 000 will be there total monthly expenses.

3. Tim and Sandy’s total home Loan repayment will be R4 168 893, not including the bond, transfer and initiation fees (R167 868).

3.1 Total Repayment ÷ (Total Months)

15 years: R3 481 720 ÷ (12 x 15)

= R19 342,89

= R9 671,44 per person

20 years: R4 168 893 ÷ (12 x 20)

= R17 370.39

= R8 685.20 per person

25 years: R4 906 984 ÷ (12 x 25)

= R16 356,61

= R8 178,31 per person

I think they should choose the 20 years term, because the repayments are more affordable, and the house will pay off earlier if they pay slightly more. Even though they could pay it off the quickest in the 15-year term, the repayments are more expensive and will leave less money for taxes and other housing expenses, as their available budgeted amount is R17 500, the amount of the 20-year term.

3.2 15 years: R3 481 720

Total interest = R1 081 720

20 years: R4 168 893

Total interest = R1 768 893

When you extend the terms of your loan, the bank will collect more interest on that loan. Which is a benefit to a shorter loan term, the interest you’d have to pay would be a lot less.

3.3 Deposit = R200 000

Loan = R2 200 000

Repayments = R19 300

When you have a smaller deposit for a house, the repayments and loan amount increases. Even though you would be paying the money back for a smaller loan amount, the initial deposit is more influential on the loan.

4. ‘Green’ features and design aim to ensure that the building or home uses the surrounding natural resources (water, sunlight, electricity, etc) as efficiently and eco-friendly as possible, so that the building does not emit unnecessary heat or green house gases.

One feature could be to maximise the vegetation and gardening areas, although the ‘urban heat’ is often caused by commercial buildings and not homes, if Tim and Sandy could reduce heat absorption in the concrete and reduce rainwater loss through their plants that would be beneficial. They can plant vegetation like this in garden beds, along the walls and on the roof (granted they have designed the roof with that in mind)

Tim and Sandy can also install rain-harvesting systems, to collect and use rainwater. This will lessen their dependability on the governments resources as well as use the environment efficiently. Simple and cost-effective structures such as a JoJo tank would be ideal. These water tanks can be kept underground or stored behind the house or in the garden.

They can also install water-efficient fittings so that whatever water they do use, it is used to save water and use less. For example, the taps and appliances that use water can be made to lower the water pressure or usage at one time. And the same can be done for the electricity efficiency. Light features that have sensors in them can turn off when they detect no one in the room, or lights can turn off when they detect sufficient daylight. These simple features will use the resources in the home far more efficiently.

Therefore, Tim and Sandy’s home can have ‘green’ features that are simple, aesthetically pleasing and eco-friendly,

5. An estate agent’s role is to be a link between the seller/owner and buyer/tenant of a property. There are advantages and disadvantages in using an estate agent. As they are knowledgeable about the legal and contractual laws they can keep both parties legally accountable. But an estate agent also charges commission or fees for their services, which can be a disadvantage. But the agents also guarantee a security in investing in property, as they understand the market and consumers’ behaviour. Estate agents also have a code of conduct they must abide by, which ensures their honestly and ethical practice. Therefore, an agent’s role is to ensure an ethical, honest and success full selling/buying deal.

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