2014 Property market predictions
The past year has been remarkable in terms of property prices and sales with RE/MAX of Southern Africa experiencing its highest winter sales figures to date and the highest month in the history of the company during November 2013 with over R1.5 billion sales recorded, says Adrian Goslett, chief executive officer of RE/MAX of Southern Africa.
He notes that although RE/MAX figures are bucking market trends, general sales volumes throughout the property industry are still not at the levels that were seen during the boom.
However, the overall property market continues to improve and the number of properties sold each year seems to be on a steady upward trend.
“While the recession brought about massive changes in the property market over the last five years, since 2011 the market has normalised and we seem to be on a far more stable and predictable path,” says Goslett. That said, he says it is very difficult to predict exactly what the future holds particularly considering the many variables that can impact the property market that the real estate industry has no control over.
According to Goslett, to have a more accurate perspective as to what lies ahead for the property market during 2014, there are a few key elements that need to be considered. These are:
Tips on how to buy property in 2014
Perhaps its wishful thinking but while it is a good time to buy property, at least according to estate agents, many would-be buyers cannot obtain home loan finance.
According to Rawson Property Group chairman, Bill Rawson, home loan and other bank loans customers should be rewarded and recognised in the form of loyalty, for example.
He explains that many people are loyal to their banks and have all of their financial transactions in one bank in many instances, products such as fixed deposit accounts, credit cards, household and car insurance, life assurance, wills and estate management.
They also use them for Johannesburg Stock Exchange share deals and sometimes even for funding their children’s education on a long-term loan.
He reckons with tough times in obtaining home loan finance, these customers deserve above average treatment, especially when it comes to home loans.
Buyers battle to obtain home loans
MSP Developments has built in excess of 4 000 homes/apartments since 2001. The company is the creator of Buh-Rein Estate, the largest private development currently in the Western Cape as well as many other affordable housing developments.
Chief executive officer of MSP Developments, Riaan Roos says in the last four to five months their sales have not only increased but almost doubled. He says the sales will always be there in their market niche which offers value-added homes to regular South Africans, and now they can see the sales picking up considerably – and they know that this trend is set to continue.
For the past five months (from July until 22 November), MSP’s increases in monthly sales in 2013 compared to the same month in 2012 have been as follows: July - up by 54.5 percent, August - two percent, September - 102.5 percent, October - 22 percent, and November to date 51 percent.
Roos says on average their sales tempo increased by 46.4 percent over the last five months, which gives them a positive outlook for 2014, especially after the Reserve Bank left the repo rate unchanged.
He says their major challenge is still getting final financial approval for potential buyers. “Sometimes clients who have signed Offers to Purchase go right through the whole approval process and then fall at the final hurdle, since the banks now generally require a deposit of 10 percent to 15 percent of the buying price.”
Property internships and bursaries
Johannesburg Stock Exchange property company, Synergy Income Fund, is giving aspiring students the chance to gain invaluable experience in the listed property sector through bursaries and internships.
For economically disadvantaged but talented students with a keen interest in pursuing a successful career in property, the chance to grow a solid foundation in the industry and gain sought-after experience is the opportunity of a lifetime.
In partnership with Go for Gold and the University of Cape Town, Synergy is investing in future industry leaders by providing bursaries and internships that will see some of South Africa’s brightest minds hone and develop their skills to realise their full potential.
The Go for Gold Programme is a public-private partnership between several property companies and the Western Cape Education Department. Go for Gold aims to develop disadvantaged young people through education, training and mentoring.
Interest rates: Should you fix or not?
With the rate of inflation still “uncomfortably high”, according to reserve Bank Governor Gill Marcus, many homeowners and buyers are starting to worry that the current low interest rates can’t last, and wondering whether the time has come to fix their home loan rate.
Jan Davel, managing director of the RealNet estate agency group, says this is sometimes a good idea for people living on a fixed income or first-time buyers who want to be able to budget very accurately for the first few years of homeownership.
He says anyone considering this option must bear in mind that the banks will charge a premium in order to fix their rate, usually for between two and five years.
This premium will vary depending on the length of time for which you want to fix your rate, but will probably be at least two percentage points higher than the variable rate you are paying now.
“This means that you stand to pay a significant additional amount of interest on your home loan until the repo rate also rises at least two percentage points – and that you will effectively lose that money if the repo rate does not rise that much by the end of your fixed-rate term.”