How does an interest hike affect commercial property?
An interest rate hike is never good news for anyone, except for those with cash invested in the bank. Nevertheless, they do occur, and investors in the property market should be aware of how this will affect them.
Jason Gregoriades, a member of the Rawson Property Group’s Commercial Business Development Team, says it’s important to first look at the challenges of commercial property investment, but always bear in mind that there are many benefits too.
“When considering commercial property - to begin with - one must realise that the deposit required by the bank, which is approximately 30% to 35% of the total loan, is far greater than what is required for a residential property, which is approximately 10%,” says Gregoriades.
SA mining towns becoming less attractive to investors
The property markets of mining towns around the world have gone from boom to bust in the past year as a result of the slump in commodity prices, with most now having a serious oversupply of real estate that is driving both rentals and purchase prices down.
This is according to Andrew Schaefer, MD of national property management company Trafalgar, who says resource-dependent towns and provinces in South Africa have not escaped the decline, although the weak currency has softened the effect somewhat by boosting the rand value of gold and other precious metals.
Schaefer says the high local demand for coal to keep up electricity production at SA’s old and new power stations has also helped, but new mining ventures, exploration projects and infrastructure builds have nevertheless been put on hold in many parts of the North West, Limpopo and Mpumalanga.
Property makes up 60% of mainstream assets worldwide
The total value of all developed real estate on the globe reached US$217 trillion in 2015 according to calculations by international real estate adviser, Savills. Issued for the first time, the analysis measures the entire developed property universe, including commercial and residential property as well as forestry and agricultural land.
The value of global property in 2015 amounted to 2.7 times the world’s GDP, making up roughly 60% of mainstream global assets and representing an important store of national, corporate and individual wealth. Residential property accounted for 75% of the total value of global property.
According to Sandra Gordon, senior analyst for Pam Golding Properties research, here in South Africa, a recent Absa report indicated that in the second quarter of 2015, the total value of South African residential property was R4 155 billion, which at the current rand/dollar exchange rate represents approximately $260 billion.
How to overcome "buyer's block"
Finding that “dream home” within your budget is always a challenge and, because it is one of the most important financial decisions most consumers will ever make, it is worth putting lots of time and effort into the search.
But searching too long could lead to “buyer’s block”, says Shaun Rademeyer, CEO of BetterLife Home Loans, national mortgage originator.
“This refers to a home buyer - especially a first-time buyer - who simply cannot decide on any property they view because they have been overwhelmed at the thought of such a large purchase - or such a long-term payment commitment,” he says.
Six things to consider when choosing an agent
When it comes to selling a property, it is vital for the homeowner to find a real estate professional that they trust and can communicate with. For most, the home they live in will be the largest financial asset they will ever own, so it is imperative that the person they choose to handle the sale of their property is from a reputable and professional real estate agency with the right attributes.
This is according to Adrian Goslett, regional director and CEO of RE/MAX of Southern Africa, who says a homeowner should select an agent who has experience and specific area knowledge.
“An agent who specialises in an area will know the particular factors that influence the local market, as well as the target market of buyers who are in that area,” he says.
SA's property market ripe for first-time buyers
In the past year, home prices in the first-time buyer sector have grown only half as fast as they did in the previous 12 months according to the latest statistics from BetterLife Home Loans, national mortgage originator.
And this is good news in the face of the recent interest rate increases, because it means that those who are currently thinking of buying for the first time won’t need to borrow much more now than they did at this time last year - and that their monthly bond repayments won’t be that much higher, says Betterlife Home Loans CEO Shaun Rademeyer.
The BetterLife Home Loans statistics, which represent 25% of all residential mortgage bonds being registered in the Deeds Office, show that the average purchase price for first-time home buyers increased by just 2.23% in the 12 months to end-January, compared to almost 5% in the previous 12 months.