By Dr Eugene Brink
It may sound like sales talk, but now is really not a bad time to buy residential property – provided you can and if you want to.
Covid-19 has admittedly harmed the economy greatly due to people losing their jobs and their income. Numerous individuals will also now want to sell their houses because of financial pressure and in the normal scheme of things.
The reverse side of this is that a substantial number of properties will now come on to the market and because of the lower demand for property due to the poor economy, poor business and consumer confidence and people who can no longer afford their properties. The banks will emerge from this crisis fairly intact and are eager to lend money to qualifying buyers to finance assets.
There is also a bigger window of opportunity, namely the low and falling interest rates. These rates are the lowest they have been in almost 50 years, therefore the opportunity now exists to acquire a property at an attractive interest rate and pay considerably less per month than you would have done six months ago.
If you are thinking about buying a property as investment and rent it out, This is also an appropriate time to do so if you can. People in general are now under extreme financial pressure and would rather rent than buy, therefore well-placed property with reasonable rent will be in demand.
The additional good news is that interest rates should probably remain low for a considerable time, as inflation (which determines interest rates’ movement) will be below or within the South African Reserve Bank’s target band of 3-6% for at least another two years due to the struggling economy.
Therefore, not much of a possibility exists that interest rates will rise drastically (if at all) in the foreseeable future. Your house instalments will consequently remain the same – or even fall some more. This therefore heightens predictability.
Contact your bank (as well as other banks) to find out for how much you qualify if you intend buying a house, town house or flat. Just remember that banks might request a deposit and that other costs, such as transfer dues, might apply – although not on cheaper properties.
The good news is that the bond mediator ooba reports that in June the average bank deposit requirement was lowered on an annual basis to 8.1% (from 13.2%).
What is the future outlook for the market?
As before the Covid-19 period, cheaper properties remain the most popular. Then the economy was also sluggish and most people are careful with their spendable income. Affordability therefore remains king.
“Right across primary housing areas the market is strong below R1.5 million. This applies particularly to properties below R1 million where buyers are benefiting from exemption from transfer dues, a lower interest rate and a favourable bank loan climate,” says Samuel Seeff, chairperson of the Seeff property group.
However, he warns buyers against low offers and at the same time encourages them to be willing to negotiate about their price.
Seeff, 3 Augustus 2020, “Buyers urged to be realistic with offers as market rebounds”, https://www.seeff.com/news/buyers-urged-to-be-realistic-with-offers-as-market-rebounds/.