Market cyclical, so if you snooze you lose
REWARDS Although it is relatively difficult to obtain finance at the moment, prospective home owners should not be dissuaded from trying to buy a property because the current buyers’ market will not last forever. “The property market has always been cyclical, providing the opportunity for those who have the courage and foresight to buy when it is in a down phase to reap bigger rewards than those who wait to buy until the market is on the upswing,” says Harcourts Africa CEO Richard Gray. On the other hand, those who wait until an upturn is under way risk losing out because it will become more costly to buy and even more difficult to qualify for a home loan. “To take a simple example, if you’re interested in buying a home that costs R500 000 now you will probably need a 10% deposit of R50 000 and about R22 000 for costs. Your monthly repayment on a loan of R450 000 will be about R4 100 a month (at an interest rate of 9%). But if prices were to rise just 3% in the next 12 months that same home would be priced at R515 000. You would need a deposit of R51 500 and about R24 000 for costs. And even assuming that interest rates had not also risen in the year, which seems unlikely, your monthly repayment would increase to R4 200.” What is more, he says, the higher the projected monthly repayment, the harder it becomes to qualify for a home loan in terms of the affordability ratios used by banks.