Residential property market predictions and buying tips
Category Housing Market
With an election in May, 2024 looks set to be another uncertain and noisy year in South Africa. Given this context, many people will instinctively adopt a wait-and-see approach when it comes to big decisions such as selling or purchasing a property. That may be a mistake, argues Herschel Jawitz, CEO of Jawitz Properties.
READ: Buying: 3 practical tips for house hunters
"It's true that there is uncertainty at the moment, but if you take the time to look, there are opportunities for sellers, buyers and investors," he says. "We tend to see only one part of the picture-one needs to take everything into account."
Jawitz highlights several factors to consider this year:
Inflation is coming down, and interest rates look set to ease. Inflation is now within the Reserve Bank's 3%-6% range, with the Governor of the Reserve Bank predicting it will average out at 5% in 2024. In response, it's widely expected that interest rates will drop by between 0.5% and 1% during the year. Even this small reduction will have an impact on bond repayments-positive news for financially stressed homeowners and buyers.
For example, the cumulative effect of a 1% drop in interest rates could reduce the monthly repayment on a million-rand home loan by R1 000. Food inflation should also continue to reduce, with further positive impacts on disposable income.
Banks are lending. Despite a slow economy and sluggish property price growth, bank lending remains positive. Increased competition means that banks are offering below-prime rates for most buyers, and home-loan approval rates and deposit requirements have remained steady-good news especially for first-time buyers.
The market is active in the mid-market price range including first-time buyers
Overall, Jawitz says that the company is seeing steady demand for houses in the mid-range of any market. As you move up the price ladder, sentiment is the key driver for a property purchase and not interest rates.
Another key driver in this context is the fact that property prices in all but a few pockets of the market have declined in real terms over the last few years. Buyers who are prepared to take a five-plus year view have an opportunity to buy at prices last seen five or even 10 years ago in certain areas.
Don't try to time the market. It is a buyer's market at the moment, which means that sellers must pitch their properties at the right level. Even in the Western Cape, where the market is better, in terms of both price and activity, than many other parts of the country, buyers have an opportunity to get better value than would have been possible in the past.
"Buyers are making decisions based on value: 'Can I get more house for the same money or can I buy for less and still get everything I want.' says Jawitz. "Sellers must understand that they are competing with other sellers for a limited pool of buyers. While sellers might have to take a lower price than wished, they have the corresponding opportunity to buy in the same market."
However, many sellers find it difficult to accept the price at which they may have to sell their property, especially if they are upgrading into a more expensive home.
"The gap between what you are selling and what you are buying may be substantial, for example, if you're semigrating to the Western Cape." he explains. "But when the market turns, the Western Cape property market will rise more quickly and higher than Gauteng's will.
"In other words, as the market improves, the gap between what your Gauteng property fetches and what you have to pay in the Cape will expand," he says. "It's about relative value, not absolute value in this case."
Property investment is recovering. Current high interest rates have discouraged many buyers, thus strengthening the rental market. Even though interest rates may reduce during 2024, rental demand will continue to be firm, and rental escalations will outpace the increase in property prices. Yields for buy-to-let investors should thus continue to improve, particularly in the Western Cape, where demand outstrips supply.
In conclusion, easing inflation and a potential drop in interest rates during 2024 will have a net positive impact on the residential property market. As always, uncertainty characterises the South African market, but for those who are prepared to take a longer-term view, opportunities exist.
READ: Buying property: Where to look for bargain entry-level homes in Johannesburg
Local Real Estate agents Lara Hamilton Potts and Keith Harrison suggests buyers work with an agent: (read full article here)
"In addition to only using an accountable and experienced Agent/Agency when purchasing a property always consider if you were to resell what are the pros and cons about the potential property. ie. be wary of steep driveways, lots of stairs, and other aspects that may hinder a potential sale further down the road."
"If you are buying an apartment or sectional title property check the levies and special levies so there are no hidden surprises that will affect you and especially the pet policies," says Hamilton Potts.
Harrison says as this will be the largest purchase you are likely to make, ensure you work with an agent you trust and who listens to you and understands your requirements regarding price and size of property.
"Ensure that the agent will guide you through the purchasing process especially and discuss important aspects such as location, security, schools, access to amenities like hospitals and shopping malls and access to Highways and Airports amongst others," he suggests.
Understand the entire costs of purchasing a property:
"It is important that first time buyers understand the entire costs of purchasing a property particularly that there are bond costs and transfer duty costs which are over and above the actual purchase price," says Richard Anderson of Local Real Estate, Ballito.
"There are differences between purchasing land, an already built property and off plan purchases. The agent should establish the end goal for the buyer to assist with this decision.," he says.
Local Real Estate agent Jake Morgan, says: "Being pre-qualified as a buyer who can afford a certain priced property is a definite advantage. This is a free service so use a trusted originator, as it also saves time on the purchase".
"When buying a ready built home, request the house plans and make sure that they are up to date and approved with an occupational certificate as sometimes renovations have not been approved by the municipality which really complicates the process. This is a vital piece of information.
"If buying for investment purposes, such as a rental property ensure you are purchasing in a popular area and usually less is more, as there is demand for a 2 bed 2-bathroom apartment. Avoid higher priced purchases as this means the rental needs to be higher and it could be a struggle to rent out," says Morgan.
In the meantime Rory Anderson another Local Real Estate agent in Ballito says, many buyers are now leaning towards secure Estates and complexes wanting security and facilities but even within these Estates, location is critical for future growth and resale.
"The properties that see the best returns on investment are those that are not on fence lines, that enjoy lovely outlooks and are also not too far from the entrance gate(s). It is also important for purchasers to think ahead and choose properties that will appeal to a wider market such as a lovely single level property as these will also enjoy faster growth than their counterparts with stairs and no gardens".
https://www.property24.com/articles/residential-property-market-predictions-and-buying-tips/32092
Author: Property24