Property Investors: Turn your real estate agents into trusted property consultants
Despite the growing consumer interest in property investment, most South Africans who own property will deal with estate agents on only a handful of occasions, when they actually buy or sell a home.
However, says Gerhard Kotzé, MD of the RealNet estate agency group, owners should aim to make trusted “consultants” out of their agents and interact with them much more frequently.
“A qualified professional agent giving unbiased and disinterested advice, free from any pressure to sell, or upgrade to a more expensive property, is the right person to help owners make decisions which will protect and improve the value of their investment.”
For example, he says, a property professional can help you to resolve the common question of whether to move to a new home when you need more space or stay put and improve or extend your current property.
“Adding on may seem like the logical answer when the disruption of moving is taken into account, on top of the costs of selling and relocating. In the past year, the pandemic has of course also caused many more owners to consider altering their homes to create more space for working or studying from home in comfort. But this may not actually be the most financially prudent decision if the cost of the additions would lift the value of the home beyond the current price range of most other properties in the area.
“This is sometimes called overcapitalisation, and it is risky because it means the property owner would probably lose money if a sale suddenly became necessary for an unforeseen reason like a job loss. In fact, most owners should really only consider extensive alterations if they are pretty certain they will be staying on in their home for at least the next five to 10 years.”
Kotzé says that before making a decision about additions or alterations, you should ask a professional agent to examine your plans and cost estimates and then compare the current value of your property with the recent sale prices of other homes in the area to see how much you might be able to spend before hitting the price ceiling for your area.
“This amount is likely to increase when the demand from potential buyers exceeds the supply of homes for sale, and property prices in the area are on a healthy upward trend, but will of course be constrained if there is more supply than demand and property prices are staying flat.
“If that is the case, it will usually be more prudent to move than to alter an existing home, and this partly explains why (according to StatsSA) the value of residential additions and alterations that were completed in the first four months of this year only showed a 7,5% increase compared to the same period of 2020, even though the value of building plans passed for additions and alterations during the same period was 38,8% up.
“However, there is another really important factor mitigating against alterations at the moment and that is the very low interest rates, which are making it much easier financially for homeowners who need more space to simply move to a bigger property and not worry about the dust and noise and disruption that inevitably comes with building activity.”
He notes that with interest rates currently at 50-year lows, many homeowners are also contemplating fixing their home loan interest rate or perhaps refinancing their property to release sleeping equity.
“But once again, they should first refer to a property professional who has access to a wide range of information and expertise that will make it easier to decide the best course of action.
“What is more, homeowners should not hesitate to approach agents for this type of advice, because good agents are not only interested in property sales and purchases, but in building long-term relationships with their clients.”
