People still need

places to live

chairman of Seeff Properties.

“The credit downgrades were expected to some extent, given that the threat had been with us for about 18 months and the effects have in many respects been factored into trading conditions.

“That said, there is no doubt that there will be financial consequences with higher interest rates, but these are still a while away. Where we may have expected a reduction in May, we now expect, and at least hope, that the rate remains flat.”

Regardless of the state of the economy, Seeff says people need places to live, so there will always be activity in the property market.

So far, the least impact of the downgrade has been on the middle to lower sector of the market where people want to buy or sell mainly in the R1.1 million to R1.2m price bands. Seeff says bonds in the R900 000 to R1m range also seem least affected.

“In contrast, the R5m-plus range is seeing a dip in activity with buyers and investors more hesitant.

“There has been a notable slowdown in this sector, but that said, this upper end of the market always takes longer to transact, so it is still too early to tell whether the downgrades will have a major impact.”

A notable impact has been seen in the R20m-plus range, particularly in Cape Town’s Atlantic seaboard and southern suburbs, where Seeff says buyers and investors are now hesitant to transact.

But buyers “cannot go wrong” with investing in Cape Town, especially the Atlantic Seaboard and City Bowl.

“But, almost anywhere across the metro and close-by areas such as the Winelands and Hermanus are good investments right now, regardless of the state of the economy.

“(Properties in) high demand urban areas and below R1.6m are also good investments, especially secure housing and those that offer good transport access for the middle-class.”

Gerhard Kotzé, managing director of the RealNet group, says demand for rental property is set to grow, so investors in good rental units will be assured of an income. And capital growth will be underpinned over the next few years by limited supply.

“They should be aware, however, that the tenant risk increases when the economy and household budgets are under pressure.

“The natural property cycle had already turned to a buyers’ market almost everywhere except Cape Town, and this trend is set to be strengthened by the ratings downgrade, which means that investors will be able to choose from many properties at excellent prices.”

Berry Everitt, CEO of the Chas Everitt International property group, says people who do want to invest should put as much cash as possible into their properties to protect themselves against interest rate increases.

“They should never buy on impulse, (they should) draw up a checklist of factors to consider in addition to price, and buy properties that only meet all these requirements – such as location, good infrastructure and public transport, proximity to shops and good schools, and good secruity.

“They should also always check on the financial management of any complex or estate they consider, as a high levy arrears is a big red flag.”

Investors should also avoid rundown properties and insecure areas.

“The best options now are modern rental units that are likely to be popular with young working people – close to commercial centres and well served by public transport.”

Laurie Wener, Pam Golding