Key factors that influence buying and selling decisions
Adrian Goslett, CEO of RE/MAX of Southern Africa, talks to Homefront about what is driving buyers and sellers and what factors will influence the local real estate market in the months ahead
IT HAS been said many times before that buying a house is likely to be one of the biggest financial investments anyone can make in their lifetime. It makes sense then that the property people own makes up a large portion of their wealth.
While not all South Africans own property, they want to. South Africans have been seen as a nation that values property ownership above other investments and see it as an important part of their lifestyle.
In light of this, understanding consumer behaviour and other factors that drive property investment is central to any property transaction for both the buyer and seller.
In current market conditions, buyers need to understand fully the property market and the factors that influence it when making their purchase decision in order to secure the best deal. Some of the key factors that influence the market are:
Demographics The composition of a population in a certain area based on age, gender and income are statistics that are often overlooked, but demographics are considered to be a significant factor in determining how real estate in a certain area is priced and what kinds of properties are in demand.
Interest rate SA currently has the lowest interest rate it’s had in 38 years. Sitting at 9%, the current rate has made investing in property an attractive option for many who have been able to afford it over the past year or so. But interest rates are expected to increase in the next year or two and may possibly reach the 12% mark again in the months ahead. Changes like this would influence the ability of consumers to purchase property greatly as it affects the monthly repayment figure and therefore the affordability ratios.
General economic performance The overall health of the economy and general economic performance as measured by economic indicators is another key factor that can have an effect on the value of real estate. Generally, a sluggish economy can be linked to a sluggish real estate market; however, investors should be aware what cycle the economy is in and mindful of the real estate industry’s sensitivity to the current economic cycle.
Government legislation Legislation is also another factor that can have a substantial impact on property demand and prices. Taxes such as capital gains tax and transfer duties all influence the affordability of buying and selling property. Transfer duties have come down considerably over the past couple of years, as have the capital gains taxation levels.
In order to get the best price for their property in the shortest possible time sellers need to up their game. This is one of the key insights from an article published on www.realtrends.com. Steve Murray, the editor of Real Trends, a trends of a dog’s discarded tennis ball. Buyers want to feel that a home is clean and well maintained. If it’s not, they’ll likely move on to the next.
Sellers who hang around during an open house
There's a reason sellers shouldn’t stick around when potential buyers arrive. While a seller may be perfectly friendly and agreeable they can alienate buyers or make them feel uncomfortable without even knowing it. Buyers should be free to converse with the agent or each other or give opinion on elements of the home. It’s part of the buying process.
Holding out for extra money at the last minute
Say a buyer made an offer that was less than what the seller wanted. The agent and the buyer have gone back and forth with a series of counter offers. The seller is close to achieving their dream price but insists on trying to squeeze more out of the buyer. In demanding more money the seller may have created bad will, as well as stressed those involved in the purchase. When it comes down to it, extracting that extra little bit may actually cost the seller more at the end of the transaction. Be careful not to win the battle and lose the war.
Sellers who don’t clean up before turning over the keys
Sellers should imagine themselves as the future buyer. Would they want to walk into their new home and find twelve cans of old paint in the garage? Or an old sofa with a broken leg in the storeroom? The tip to sellers is to try to make the home as spotless as possible for the new owners.
Locally, current market conditions show that there is still an imbalance between the high levels of residential property stock and demand for it. While this presents an excellent opportunity for buyers who can demonstrate affordability to financial institutions and who have credit records and therefore access to finance, the high levels of household debt compared with disposable income will mean that property demand will remain fairly flat for the remainder of the year.
In fact, with interest rate hikes predicted in the near future we are anticipating that demand will remain at much the same levels as the second half of 2010 for the foreseeable future. But property is a long-term investment and buyers who enter the market now at an alltime low will reap the capital benefits through appreciation over the next few years.
There are many factors to consider when buying or selling property and understanding market dynamics is essential for successful investment ventures. There can be no doubt that understanding the key factors that drive the real estate market is essential to performing a comprehensive evaluation of a potential investment and thereby ensuring you are investing wisely.