select
|

Look for capital growth in your home investment

Gauteng homeowners – both existing and aspirant – should not be daunted by the current flat-lining trend in residential property prices, but rather focus on the growth of the capital portion of the investment at the time of purchase. 

 “This is a point I made at the start of the 2008/9 property downturn – and it applies equally today,” says Ronald Ennik, founder and CEO of Ennik Estates, an affiliate of London-based Christie’s International Real Estate.

“Granted, South Africa now faces a particularly difficult, and different, economic and political climate – overshadowed by succession issues surrounding the Zuma presidency; the yet-unresolved challenge of State capture; perceived rampant corruption at virtually all levels of government; the education crisis; alarming levels of unemployment; and, not least, the ever-threatening shadow of global rating agency downgrade that overhangs our economy.

“It is easy to succumb to negativity in the face of the waning sentiment caused by these circumstances. However, the fact that the residential property market avoided a slump in the tough operating conditions of 2016 is a clear indication it is now well poised to move into a new phase of growth,” says Ennik.

The silver lining

“It is the extent of the growth of the capital portion of the home purchase that is the silver lining of the transaction. 

“Simply put: If you bought a  R2-million property – by way of a R400 000 deposit and an 80 per cent bond of  R1,6-million  – and the investment grew in value by no more than five per cent a year (in line with inflation), the home would achieve a value of around R2,55-million over five years,” says Ennik.

“The point is that your initial personal capital investment of R400 000 would thus have more than doubled over the five years to close to R1-million – while the value growth of the property as a whole would have been only 35 per cent over the same period!

“Remember, whether we are paying rent or a bond, we all have to live somewhere. For a buyer, it is more relevant to calculate the growth of the capital invested, rather than establish the value growth of the property as a whole. It is the capital growth that counts,” says Ennik.
Opportunities to buy at a discount

“Meanwhile, history is repeating itself in the sense that right now, as at the end of 2008, there are opportunities to buy at a discount in the residential property market in Gauteng – and, probably, in other major urban areas…with the obvious exception of Cape Town, which is surfing a wave of re-location (or ‘semi-gration’) buying from the hinterland,” says Ennik.

His advice to buyers in the current market circumstances: “Do your homework thoroughly, but understand the price cycles. That way you will know that now is fundamentally a good time to buy – after eight years of no real growth.

“Buying a home is a lifestyle thing – and if you see something that really fits your lifestyle and your family needs, act now. You will be buying at a discount anyway. By holding on for a further price dip that may not happen, you could miss out on the ideal home,” Ennik concludes.




  Comment on this Article

  Please login to post comments

Post to my facebook wall
  
2000
Characters remaining


    Latest Property News
    • 23 May 2018
      Homeowners who are thinking of selling and “trading up” to a bigger or a better home had better be quick now if they want to get the best deal.
    • 23 May 2018
      The new Loftus Park development in Arcadia is really going to boost the demand for homes and rental accommodation close by and the neighbouring suburb of Sunnyside, says Gerhard Kotzé, MD of estate agency group RealNet Holdings.
    • 23 May 2018
      The importance of correctly pricing a property for sale is more imperative than ever. This is according to Debbie Justus-Ferns, divisional manager of Renprop Residential Sales, who says that despite this crucial selling fact being emphasised so often, in the current market, many sellers are still expecting unrealistic prices for their homes which is having a negative impact on the ultimate sale price.
    • 22 May 2018
      Extreme weather appears to be the new normal, evident by the volume of insurance-related disputes reaching the industry watchdog’s desk. To avoid a situation in which your insurer refuses to pay up, you should proactively ensure that your home is well-maintained and ready for whatever winter has in store.
    • 22 May 2018
      As the impact of technology on the real estate industry becomes more significant, it is clear that there is a need for an objective look at not only traditional real estate models but also online and other alternative low-commission real estate agencies, to examine what they offer and what their impact might be.
    • 22 May 2018
      According to Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, dealing with some sort of neighbour dispute is an unavoidable part of life unless, perhaps, you choose to live on a remote small holding for the rest of your life.
    • 22 May 2018
      Buyers feel that they are getting value for money in the Northcliff area without having to compromise on aesthetics and amenities
    • 21 May 2018
      Secure living is one of the growing property trends in South Africa and Nooitgedacht Estate in Stellenbosch certainly ticks the right boxes for buyers who want a secure, exclusive lifestyle in one of the Boland’s most sought-after estates, says Pam Golding Properties.
        
    X
    Subscribe to the MyProperty Newsletter

    Name  
    Last Name  
    Email Address  
    Email Frequency
    select
    X
    Share this Page

       
    For Sale Property
    Rental Property
    More Options
    About
    Connect with us
    FEEDBACK