select
|

Analysts answer: to buy property or not?

Buying property, whether it is your first time or not, is for most of us a major decision likely to impact our lives for the foreseeable future.

Analysts and market watchers to whom we frequently look for advice are often loathe to share their wisdom in this regard, lest they be accused of having agendas. Estate agents and bankers notably fall into this category.


While again drawing on their expertise, it is hoped readers will be able to glean some useful information from their views.

We begin with some pointers from economist Chris Hart of Investment Solutions. “If you are making an investment …what is the return on the investment and what is the return going forward? Is it cheap or expensive in relation to other assets you can buy?  Are the rental returns on the price you’re going to buy at competitive to equity, bonds, inflation-linked bonds or listed properties? That’s basically the criteria you have to apply as an investor.”

Hart says in this regard he is not convinced buying property is the way to go, but it does depend on the market segment you have your eye on.

He adds that obtaining loans for high-end properties is still restrictive given the large percentage often needed as a deposit. For example, a R5m property could mean a down payment of R500 000.

On the other hand, Hart says the outlook is more promising in the R400 000 to R800 000 housing segment where transfer duties are also more manageable. “There is still affordability within the emerging working class. The tradition of highly desirable property in the northern suburbs of Jo’burg is bumbling along; your new developments in Soweto are doing quite well.
“Property in the R400 000 market will generate much better total return than say an apartment in (upmarket) Melrose Arch.”

Established homes at current interest rates are also likely to be more affordable in that you will be able to buy below current construction costs. “You can sit on your property and between inflation and time, you will do well,” Hart adds.

CEO of Ennik Estates, Ronald Ennik, shared what he called a “strange phenomenon” in that he had 12 top banking executives on his book seeking property in excess of R10m. “What do they know that we don’t know? They are well informed. I don’t think I’ve ever … had such a large portion of top executives all looking to buy property, all more or less at the same time,” Ennik told Moneyweb. He added: “That’s not estate agent talk, that’s just a fact. Bankers are out there looking to buy. They would not be buying if they felt the market was going to continue slumping.”
He says agents have also noticed an increase in attendance at show days. “We get up to 20 people coming to show days which is an increase from about ten to 12 people that were coming to prime areas, good areas.”

Ennik says what is also significant is: “It’s been a down cycle for five years. In my 30-year career I’ve never seen a cycle longer than three-and-a-half years and the pendulum always swings the other way eventually.”

He is of the view that the wealthy are again looking at putting their money into assets with property being one of them. “Fundamentally now is the right time to buy and I can only think that the bankers are also coming to that conclusion.”

FNB CEO of housing finance, Marius Marais, stresses keeping an eye on the property cycle is key to your decision on whether to buy or not, or whether to sell your existing home. “If you buy at the top end of the cycle, in the short-term, if you want to exit that property … over a period of two or three years, it may not be a good idea (to sell).

“Over the long-term we have not seen big negative equity created in the property market. If you bought ten or five years ago, I guess one should still make a profit if you sell today. So it really depends on where in the cycle you purchased and where you want to buy. You just have to be aware of where you are in the market.”

Absa  property analyst, Jacques du Toit states: “Based on the current state of the property market against the background of trends in the economy, interest rates and household finances, it is probably not a bad time to buy residential property.”

Du Toit adds house price growth has been relatively low or is in negative territory in certain segments and regions. “These price trends together with the low interest rates have caused the affordability of property to improve in relation to household income.”

What all property analysts agree on is that any potential homebuyer must make provision for a turn in the cycle and possible interest rate hikes, ensuring they will be able to service their mortgage bonds in the foreseeable future.

In conclusion, when the mortgage is paid off, you as the owner may have an asset than can be used as collateral for other debt and a possible income stream.

(Moneyweb)



  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