Don’t delay, upgrade today

Sellers immediately want more for their properties while buyers still want to pay recession prices – this is always the scenario when a real estate market starts to turn upwards.
However, says Lew Geffen, chairman of Sotheby’s International Realty in SA, this should not deter those with plans to upgrade to bigger or better-located properties from doing so as soon as possible.
Indeed, he says, there are several very good reasons for doing so, particularly in the current SA market, “the first of which is that it is probably going to take some time for home prices to start showing any significant upward movement.
“Although there are many more buyers in the market now than there have been for the past few years, it is not quite a sellers’ market yet. In addition, the banks are keeping a tight rein on things by valuing properties very conservatively for home loan purposes.
“There is thus no point in delaying the sale of an existing property in the hope of getting a higher price to assist your upgrade.”
The second reason to make an upgrade move now, Geffen says, is that interest rates could very well move off the current historic lows within the next 12 months, and homeowners who want to upgrade might then find it more difficult to qualify for a new bond in addition to having to budget for bigger-than-expected monthly repayments.
“Thus their new home could end up costing much more than necessary in the long term. For example, the monthly repayment on a R2m home bought now with a R1,8m bond at the 8,5% prime rate would be about R15 600, putting the total cost over 20 years at some R3,749m.
“But an interest rate increase of just one percentage point would push up the monthly bond repayment on the same bond to R16 800, and the total cost over 20 years to R4,027m.”
And finally, he says, experts predict that the credit amnesty which government intends to introduce before the end of the year is likely to make it more difficult for anyone to get a home loan.
“The banks are opposed to the amnesty, which will see millions of credit records expunged from the credit bureaux, because it will make it extremely difficult for them to tell the difference between high risk and low risk borrowers. Thus they are going to become extremely cautious about lending once more, and may well pass their additional risk on to consumers in the form of bigger deposit requirements and higher interest rates.
“In short then, there really is no time like the present for anyone planning a home upgrade.”

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