select
|

SA property investors buying in cash

So maintains Org Geldenhuys, managing director of property development and marketing company, Abacus Divisions.

“Since late last year – and increasing during 2011 – we have seen more than 50% of our deals being concluded by clients making cash payments. This seems to be an increasing trend as investors are forced to find alternative funding sources, or to raise the cash – as banks are just too reluctant to lend money, erring seemingly excessively on the side of caution.”

This trend also seems to be playing out in the USA, where USA banks – following that country’s disastrous sub-prime mortgage crisis - are even more reluctant than SA banks to loan money.
Lori Nery, owner of Coastal Realty in New Bedford (USA), said that out-of-town investors have been inquiring about buying properties in the struggling coastal city – where property prices have been plummeted. Now is the time to buy – but banks just aren’t lending money.
He said that nearly half of his company’s sales this year have been cash only. “I think the word is out we are a good bargain,” Nery said.

“This trend towards paying cash is not good for the commercial property market because not all investors have access to cash,” said Geldenhuys. “I get the feeling that banks are being excessively cautious and this could have a serous backlash in the property market – in both the commercial and residential sectors.”

Commenting further, he said that property developers are increasingly developing for cash, later approaching the banks for finance. “This is undoubtedly happening more and more as banks are reluctant to take risks and developers are seeing opportunities that just cannot be missed. These days banks only finance on the back of a solid tenant signing lease agreement of about three to five years, with decent escalations.

“At Route 21 we have seen that over the past two years almost all the developments made on risk were developed using cash – and almost all have found tenants. Developers are richly rewarded for the risks taken, with leases up to five years and a 10% escalation in rates. Tenants also like new buildings – and although markets are tough we see people moving to improve the company’s image, as not all companies are cash-strapped. There are pockets of excellence in the tenant and commercial property market,” said Geldenhuys.

“For now it seems that those wise investors, or developers, with cash in their hands can cherry pick good investments – provided they buy and develop in sought after areas, such as Centurion’s newest development node. Additionally, most developers with cash in hand are looking to plough the excess cash into developments as interest received on those cash balances are dismal.”


  Comment on this Article

  Please login to post comments

Post to my facebook wall
  
2000
Characters remaining


    Latest Property News
    • 24 Nov 2017
      Demand for secure estate living in Hout Bay has risen sharply in recent years, precipitating a spike in development with estate homes now accounting for 20.24% of the property landscape with the launch of an exclusive new gated development on 26 November adding 20 more units to the existing 1250 estate homes.
    • 24 Nov 2017
      There are some things that money can’t buy – spectacular views from Mouille Point to the V&A Waterfront and a trendy and lively neighbourhood that encapsulates the very best of the Cape Town lifestyle.
    • 24 Nov 2017
      Tshwane’s four-bedroom Mayoral mansion, nestled among ambassadorial residences in the upmarket suburb of Muckleneuk, fetched R5.1 million after spirited bidding at High Street Auctions’ final sale of the year.
    • 23 Nov 2017
      Reserve Bank Governor, Lesetja Kganyago, said that the Monetary Policy Committee had once again decided to let the interest rates remain unchanged with the repo rate at 6.75%, and the prime lending rate at 10.25%.
    • 23 Nov 2017
      As the holiday season approaches, most of us are counting the days until that year-end bonus hits our account. There’s nothing quite like a little bank balance booster to get us in the holiday spirit.
    • 23 Nov 2017
      The Adelphi Centre (now entitled “ARTEM") in Sea Point, Cape Town, is being extensively renovated, and once complete will offer an ultra-luxurious galleria style shopping centre unlike any other seen on the Atlantic Seaboard or in Cape Town.
    • 23 Nov 2017
      If you are looking to sell your home in today’s real estate market, there are certain things that you need to include both inside and outside your house. Today’s generation of home buyers is looking toward a more eco-friendly, energy and water conscious home, and if your house stands out then you are more likely to be able to sell it.
    • 22 Nov 2017
      Most people know of the Community Schemes Ombud Service (CSOS) and that levies must to paid to fund its operations. In this article the experts at Paddocks will address some of the issues that are causing confusion.
        
    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