Caution and investigation can almost eliminate buyer's remorse

Financial consultants have always advocated investing a significant portion of their clients' portfolio in property, but recently certain commentators in South Africa have been advising people to stay away from property assets.

Tony Clarke, managing director of the Rawson Property Group, believes those who have come out so firmly against property as an asset class have in some cases invested unwisely in property and are now damning the whole sector on account of their own mistakes.

However, he says many others who did their research before buying are happy with their purchases and are definitely not suffering from buyer's remorse.

'When buying a residential property, it is essential to understand the growth potential for the home and the area. If the area is showing signs of being incorporated into the urban sprawl and of becoming a higher- density, higherdemand precinct, obviously values will increase.

'On the other hand, certain areas clearly have no prospect of economic growth and prices will not take off in the foreseeable future.

'Then, too, the position of the property in its area is important. Homes with a view tend to appreciate faster than those in less attractive positions, and those within walking distance of public transport are always particularly soughtafter, especially in the cheaper suburbs.'

Clarke says one of the big mistakes buyers make is not to check the municipality's plans for the area.

'It is not difficult to see when an area is taking off, but once that does happen, many single-storey homes may be given second storeys, which could spoil a view for neighbours, block out sunlight and reduce privacy. Some may even be demolished to make way for three- or four-storey blocks, which, if not sensibly handled, can also impinge on the surrounding homes' security and privacy.'

He says emotionally charged decisions should always be avoided.

Quite often, buyers have decided a property is a good investment, but then in their determination to get the property will allow themselves to be talked into offering a price that is well above what the market justifies.

It is also dangerous, he says, to make an offer to buy after only one visit. In most cases two or even three visits are essential, and these are valuable because they allow buyer enthusiasm to cool off.

It is also dangerous to be influenced by one or two favourable features - for example, granite tops or under-floor heating. These, although beneficial, may be offset by less satisfactory aspects which should certainly be taken into account.

'Those who react too emotionally are likely to buy the first or second home they see,' says Clarke.

'They then discover later that better options were available not far away and they would have done a better deal.

'Many purchases can be more viable if buyers get low interest rates on their mortgage bonds. Buyers today, often grateful to be awarded bonds, frequently don't take the trouble to see if they can get better terms elsewhere.

'They need to bear in mind that banks are in competition with each other and if their credit credentials are good the banks should be offering competitive terms.

'Only about 50 percent of bonds are awarded at prime and some buyers are paying 2 percentage points or even 2.5 points above prime.'
Having bought the property, many investors fail to observe another golden rule, which is to increase the equity in the property as fast as possible by paying back the bond each month at above the agreed rate.

Finally, says Clarke, the technicalities of any building that is about to be bought should be carefully checked by a structural engineer or an architect. Building inspectors can also provide a useful service, but, he says, there are few with comprehensive knowledge of structures, electrics, plumbing, gas installations, waterproofing and security measures.

'Often they are experts in one or two of these aspects but not in the full range. Such inspectors need to be grilled to find out just how much they know and, if necessary, other inspectors then need to be brought in to check out the home. This is particularly important when it comes to damp and possible structural defects,' says Clarke.

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