Do your sums before you downscale

If you’re thinking of moving to a smaller home that is easier to manage and more secure, you might need to “downscale” more than you thought to make the move worthwhile.
So says Richard Gray, CEO of Harcourts Real Estate, who notes that about one in four home sales these days is being made by empty-nesters hoping to downscale from a family home and hopefully cut costs while also improving their personal security.
“However, the latest housing review from Absa illustrates that there is really not that much benefit in moving from a medium-size house to a small house at the moment. It shows that the average price of a pre-owned, medium-sized home achieved year-on-year growth of 6,9% in August this year to R1,14m, while the average price of a small home grew 11,4% to around R824 000.
“And using these values, the costs of selling a medium-sized home and buying a small one would total around R124 000, including selling commission, bond registration, legal fees and transfer duty – which would leave just over R190 000 to cover a deposit on the new home and the costs of moving,” he says.
“What is more, the margin would probably be even less if the smaller home was in a new development, as newly-built homes are now at least 20% more expensive than pre-owned homes of the same size. The projected savings on maintenance, utilities and possibly security would thus have to be really considerable to make the change worthwhile.”
On the other hand, Gray notes, those who are prepared to make a major change from a large house to a small house do stand to achieve immediate financial benefits. The Absa figures show that the average price of a large home is currently R1,77m, which means that the total costs of selling and buying again would be about R168 000, and that there would be R778 000 left to put towards a deposit and/ or retirement savings.
“The message here is that owners who are thinking of downscaling must do their homework first. They need to establish the real differential between what they are selling and what they are hoping to buy – and how they could possibly increase this,” he says.
Owners moving from a medium-size house, for example, could perhaps consider moving to a townhouse or an apartment rather than a small house. “Or they might choose – as an increasing number of people all over the country are doing – to move from a big city to a smaller home or retirement village in a country town, where property prices are generally lower.
“Either way, however, they should not make a hasty decision that could negatively affect their financial situation for years to come.”

  Comment on this Article

  Please login to post comments

Post to my facebook wall
Characters remaining

    Latest Property News
    • 19 Apr 2018
      The rental market is a cut-throat sector of the real estate market that waits for nobody. According to Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, first-time renters need to be fully prepared before they even start the process of looking for a place to rent in order to avoid the disappointment of losing out on their ideal property.
    • 19 Apr 2018
      Choosing to buy your first home instead of continuing to rent is a big decision that will usually take some time to put into action, but the sooner you can save up a sizeable deposit, the closer you will be to reaching your goal.
    • 18 Apr 2018
      Selling your home is no small task and as you will quickly find out, there are a lot of misconceptions about the process. Gerhard van der Linde, Seeff's MD in Pretoria East lists the top 5 misconceptions when you are selling your home.
    • 18 Apr 2018
      The Cape Town municipality is now installing water-management devices at properties that have been non-compliant with the new level 5 water restrictions and there are talks of fines between R5,000 and R10,000 for households that use too much water.
    • 17 Apr 2018
      The recent interest rate cut has stoked the coals in the first-time buyer’s market. At least for the next two months until the next interest rate announcement, homeowners are guaranteed lower monthly instalments than in the previous quarter. But, is it wise to take out a 100% bond just to enter the property market while interest rates are low?
    • 17 Apr 2018
      By the end of 2017, very few housing markets remained unaffected by the mounting pressure of the prevailing economy and political climate but some fared better than others, especially sought-after, well-situated suburbs like Parktown North that tick the top boxes on buyer’s wish lists.
    • 17 Apr 2018
      With urbanisation at its peak and population density in major cities reaching frustrating levels is it any wonder that more South Africans are choosing to move away from the chaos to a quieter life?
    • 16 Apr 2018
      When you are selling your home, you will have potential buyers coming to view it. During these times, you will need to ensure that each room of your home is clean and beautifully decorated.
    Subscribe to the MyProperty Newsletter

    Last Name  
    Email Address  
    Email Frequency
    Share this Page

    For Sale Property
    Rental Property
    More Options
    Connect with us