Avoid analysis paralysis, buy property with an investor's mindset
Potential buyers should not spoil their own chances of becoming homeowners by worrying too much about interest rate movements or property market cycles.
So says Gerhard Kotzé, MD of the RealNet estate agency group, who points out that with buying a home, as in purchasing shares, market “timing” is not the only factor that should be taken into account – and the most successful investors know that while buying low and selling high is important, you can also only make money when you are actually in the market.
“They don’t sit on the sidelines trying to figure out when certain stocks will hit their absolute lowest or highest values, but they do try to buy those with good growth prospects and the ability to keep delivering good returns.”
Consumers should look at home buying in the same way, advises Kotzé.
Tale of two markets, will 2020 be a turnaround for property sellers?
Two to three years ago the property market was all about sellers, rising prices and the “tale of two cities”, with Cape Town on a high performance trajectory and no price too high for upper end sellers.
Now, says Samuel Seeff, chairman of the Seeff Property Group, it is all about buyers and the “tale of two markets”, with two distinct price tiers operating in a juxtaposition.
“The low to mid-market to R1.8 million (R3 million in some areas) has performed well despite perceptions,” he notes. “In contrast, the R10m-plus upper-end market is almost dead compared to three years ago.”
After the initial optimism following the elections, 2019 emerged as challenging for the property market, bogged down by the ongoing low-growth economy, political noise and property ownership concerns. He says activity has concentrated largely in the market below R1.8 million (R3 million in some areas) comprising “buyers who are generally committed to staying and happy to buy”.
The Bank of Mum & Dad and how it affects home loan applications
Affordability remains the biggest problem for first-time home buyers, with many having to delay a purchase until they are well into their 30s due to rocketing living costs and high debt levels – unless they are lucky enough to receive help from their parents or other family members.
“And this is not a phenomenon unique to South Africa,” says Carl Coetzee, CEO of home loan originator BetterBond. “The so-called Bank of Mum & Dad (BMD) has also been pouring money into the housing market in many other countries for the past few years.
“Recent research shows that in the US, for example, one-fifth of all 18- to 37-year-old buyers are now purchasing with family financial assistance, and that in the UK, the BMD gave young buyers more than R120 billion worth of assistance last year. In Australia, the BMD has officially been recognised among the top 10 lenders in the country and is currently providing 20% of first-time home buyers with around R700 000 worth of assistance each.”
Over the past few years, he says, first-time buyer aspirations in SA have been helped by the banks’ increased willingness to lend to home buyers and to advance a greater percentage of no-deposit loans to low-income buyers.