Buy­ers and renters must ad­just ex­pec­ta­tions

Weekend Argus (Saturday Edition) - - PROPERTY -

WHILE the Western Cape con­tin­ues to be the top per­former in the South African res­i­den­tial prop­erty mar­ket, of­ten far out­pac­ing other prov­inces, peo­ple deal­ing in this sec­tor must not al­low their ex­pec­ta­tions to be­come de­tached from the re­al­i­ties of to­day’s sit­u­a­tion, says Rowan Alexan­der, di­rec­tor of Alexan­der Swart Prop­erty, a new com­pany based in Brack­en­fell.

“En­cour­aged by spec­tac­u­lar price in­creases of in, some cases, 10% or more per an­num, many es­tate agents con­tinue to ex­ag­ger­ate the strength of the Cape mar­ket,” he says.

“It is true that this is still a very good place to buy and fur­ther price in­creases are likely.

“How­ever, it has to be recog­nised that our fig­ures show that from the start of this year on an an­nu­alised ba­sis, value rises have been around 10% or 2% to 3% lower than in pre­vi­ous years.

“The 2% in­ter­est rate rises of the past three years and grow­ing in­fla­tion have made the po­ten­tial buyer’s de­ci­sion a great deal more dif­fi­cult than it was only a year ago.”

Three years ago, a buyer earn­ing R58 000 per month might have qual­i­fied for a bond of R2 mil­lion, said Alexan­der. Now, sup­pos­ing his in­come has re­mained at much the same level, he would find he is el­i­gi­ble for a bond of only R1.735m.

In the same time pe­riod, a R2m house might have in­creased in value to R2.55m, or by 9.5% at a con­ser­va­tive es­ti­mate.

“Bear­ing in mind that wage in­creases over the past three years have not risen at any­thing like the same rate en­joyed by prop­erty prices, it is clear that to­day’s buyer faces a tougher sit­u­a­tion than he did only a few years back,” says Alexan­der.

“Salaries are in general ris­ing slower than home prices.

“This, com­bined with in­fla­tion and ris­ing in­ter­est rates, has made it es­sen­tial for buy­ers to re­assess their po­si­tion and ex­pec­ta­tions, but we find many are un­able or un­will­ing to do this.”

In the rental mar­ket, dif­fi­cul­ties re­gard­ing the pur­chase of homes tra­di­tion­ally re­sulted in a greater de­mand for rental prop­er­ties.

Even here, how­ever, he says achiev­able rental prices and re­turns per an­num in the Brack­en­fell area (which is typ­i­cal of most in Greater Cape Town) have been re­duced to about 8%, es­pe­cially in homes rent­ing for above R15 000 a month.

“Land­lords are still on a good wicket, but they, too, have to face the re­al­i­ties of to­day’s more dif­fi­cult mar­ket.”

Be­low R15 000, says Alexan­der, de­mand re­mains good but land­lords are likely to be faced with tougher con­di­tions and these could pre­vail for sev­eral years.

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.