The South African Tenant Profile Network annual report published at the end of 2020 showed that vacancies in South Africa’s residential property market were more than double those recorded at the start of that year.
The figure rose from 5% to 11% – but is slowly showing first signs of improvement.
Particularly hard hit were the two price categories that are always the first to feel the effects of a tough economic period: those homes renting below R3,000 per month and those renting above R25,000 per month.
Three main factors have impacted on the rental market
The first factor affecting the market was the Covid lockdown which resulted in an economic lockdown.
This caused jobs to be lost, incomes to be reduced and rentals to fall.
The government had realised that in future lockdowns jobs, as well as lives, had to be protected and this was evident in the second lockdown.
It is unlikely that we will see such drastic measures taken again—with the result that the economy and rentals will now start to show a steady improvement.
The second major cause of the rental slump had been the flooding of the rental market by the former short-term rental sector
This was the result of the Covid-related decline in tourists not only from overseas but also from South Africa’s inland cities.
Faced by a lack of tourists, short-term landlords put their stock into the longer-term rental market, adding to the over-supply situation already brought about by the economic lockdown.
This situation will improve as the tourism industry gets back into its stride towards the end of this year.
Already there are signs that no more “dumping” of former short-term rental stock into the longer-term market will take place and it is quite possible that by 2022 many of the former short-term rentals will have reverted to their previous roles. Again, therefore, the future for the rental market as a whole looks better.
Lower interest rates
The third factor impacting on the rental market is the lower interest rates in operation for most of 2020.
In many cases the tenants’ current rentals became only a little higher or even equal to their monthly instalments on the bond that they could now get at 7% prime or even prime less 1%.
Quite rightly, therefore, many seized the chance to buy at last, leaving the landlords again with surplus stock.
But the low-interest rates, the only possible reaction to the economic downturn, will not remain in place for much longer.
As the economy improves, higher rates will return and it is even possible that some of those who are buying now will have to revert to renting—so the over-supply and rental slump situation are also temporary.
All the indicators, therefore, point to a brighter future for the rental market
Landlords will however for the time being have to be sympathetic to the plight of many of their tenants– and realize that they expect the security of their homes to be at a higher level than previously.
They also increasingly value homes that under the present limited travel and work-from-home conditions offer them an attractive lifestyle – with parks, gardens, open spaces, walks, retail centres, wine farms and open-air bistros all nearby.
Article referenced from https://bit.ly/3pRP2N8
Contact us for all your rental needs, information or advice. We are affiliated with the Credit Bureau, Landlord Legal Eviction Insurance, ExplorIT Interactive accounts software and have many years of experience in this field.
Buying a home is a significant financial commitment. Sure Bond, a subsidiary of Ooba, takes you through some of the additional costs involved, so you can plan ahead.
● Knowing the true cost of buying a home will enable you to budget appropriately.
● Other than the cost of the home itself, the biggest costs associated with buying a property is the bond registration and transfer costs, which are unavoidable.
● Initiation fees are also levied on a home loan and are standard admin fees charged by the bank that granted the loan.
● Additional expenses you should prepare for include moving costs, repairs and maintenance, rates and levies, and security costs.
Wouldn’t it be lovely if the price tag on your new home was all you had to pay? In reality, there are several hidden and not-so-hidden costs associated with buying property. Here are some of the major expenses, to help you prepare.
The cost of buying a house: 8 Expenses you should prepare for
“Buying a home is the single biggest financial commitment and investment that most people will make in their lifetime,” “But there are a lot of other expenses to factor in, and it’s worth planning for these in advance of transfer so that you can be sure you have the funds in place.”
The following expenses should be planned for:
1. Bond registration and transfer costs
These are probably the biggest cost associated with buying a property that home buyers must be aware of and budget for. They are also unavoidable. You can work out the fees on properties you're considering by using a bond and transfer calculator.
But to give you an idea, with a R1 200 000 bond, for a freehold property, with the seller not VAT registered, and the purchase being conducted by a natural person (ie you’re not buying the property as a trust or company), the bond registration cost estimate would be R31 618 (incl. VAT) and the transfer cost estimate would be R31 580 (incl. VAT). Note, these costs are an estimate, and include the bank initiation fee, which other calculators may not include. You should also take into account deeds office fees of approximately R1220, and other fees that may be charged by attorneys at their discretion.
“Banks may not necessarily grant 100% finance which will require the buyer to pay a deposit, and currently only in select instances will some of the banks incorporate the costs of transfer, so make sure that you have the funds available for this vital part of the home-buying process,”
2. Moving costs
You’ve bought the place; now you’re going to have to move in. Depending on where you’ve been living, and how much furniture you already own, you might have to hire a moving company to get you into your new home. It is advisable to obtain a couple of quotes to compare the costs and determine the insurance cover provided for your possessions whilst in transit.
The costs can be anywhere between R5 000 and R15 000 in the same city, but most companies offer a discount if you move in the week and in the middle of the month, when demand is lower. You can also investigate mini movers or bakkie-for-hire options, which would be cheaper, but perhaps a bit more work for you.
3. General repairs and maintenance
While some homes are in perfect condition on the day of transfer, chances are you’ll have to do some cleaning, repainting and general repairs to make yours feel more like home. Some of these will be essential, others will relate to your own personal taste or budget.
“You should definitely set aside some cash for unforeseen expenses,” says Coetzee. “Try to gain access to the property ahead of moving in, so that you can write up a realistic budget for what you will need to spend.”
You should also set aside a few hundred rand for all the basic household maintenance items you will need, like detergents, brooms, cloths and polish. It is helpful to have a few spare light bulbs ready in case you need to replace old ones as well. Don’t forget that houses need ongoing maintenance, so always keep some cash ready for unexpected expenses.
4. Getting the utilities in
If you are buying a freehold property (not a sectional title), you will need to register for your water and electricity connection, and your telephone and internet lines if you need those. These costs vary from area to area, and the internet fee will depend on the type of connection that you want, and whether the relevant lines are already installed.
Generally speaking, put aside around R1 000 to R3 000 for connecting the electricity, water and telephone – but you may be required to put down a deposit with the telephone company as well, depending on your credit profile. Investigate the different internet connection costs with your service provider.
And obviously, once those services are connected, you will have to pay for them every month.
5. Rates and levies
If you have purchased a freehold property, you will have to pay rates and taxes, which can be anywhere from a couple of hundred to a few thousand rand per month, depending on the value of your property and the area. Rates cover sewerage usage and garbage removal, while your taxes are calculated against the value of your property. The estate agent should have included these rates in the information about the property when you were house hunting, but if you need to find out, you can ask the municipality representative when you register for water and electricity. These rates will stay the same every month.
If you have bought into a sectional title, the apartment block’s body corporate will have set a levy to pay every month for the general upkeep of the buildings.
Some suburbs have additional levies that are charged for a street security guard or boom operator. While these are sometimes voluntary, if you benefit from the arrangement, it’s good to contribute.
When buying a new home, it’s a good idea to assess the security of the other houses in the area, and find out about the crime rates from the local police station, and then update your own security accordingly. And you’ll have to budget for a monthly armed response fee as well.
“Many security companies offer a package deal on installation with a contract for a certain term,” “Be sure that you’re happy with the length of the commitment before signing a deal like this, but it can be a very cost-effective way to get a good security system in place.”
Your bank will insist that you have homeowners’ insurance in place to cover any structural damage to the property. This is generally affordable with competitive options available to you. However, your possessions are not covered by this insurance, so it’s a good idea to explore the costs of an additional policy to cover you for theft.
Important to note - If you have existing insurance cover, you must inform your broker of your new address as this can change the risk factors in your policy and alter your premiums.
8. Furniture and electronics
Once you have a home, you will want to fill it with beautiful things. Of course, this kind of refurbishment is a luxury, and one that can be put off until you have settled in. However, if there are any items that are vital to making your life in your new home comfortable, then get a costing on these and factor them into your budget.
Making the home-buying process easier…
“Owning a new home is liberating, but the financial commitment can feel like a burden,” “With forethought and planning, you can budget for the major expenses that are likely to come your way, which will give you a bit of control and confidence as you settle into your new home.”
If you are just thinking about buying a home, or are ready to put in an offer, Sure Bond gets you the best deal on your home loan – for free. To make the home-buying process that much easier, Sure Bond also offers a range of home loan calculators to help make the home-buying process easier. Get prequalified for a home loan with Sure Bond, then, when you’re ready, you can apply for a home loan with Sure Bond
The gift of giving – No better time than now to buy a home !!!
Whether you are a first time buyer or wanting to upscale to another property now is the time to do so with a historically low-interest rate environment that has subsequently created the opportunity for many South Africans to enter the property market for the first time, as it becomes cheaper to buy than rent.
Many people are upscaling, data shows that buyers are looking at properties that previously they may not have been able to afford, with a visible shift in the number of enquiries on properties above R1.5million. Buyers are trying to get the highest bond amount possible from the banks while interest rates are low.
Ooba predicts the Property Market in 2021 will continue to be driven by first-time homebuyers (FTHBs).
FTHBs are expected to take advantage of the continued appetite for banks to lend at high loan-to-value’s and the resultant low home loan instalments. Individuals currently renting a property will shift to purchasing their first property, often at a monthly cost lower than their current rental.
The buoyancy up to R3m (R6m-R8m in high suburbs) will sustain until late into 2021. No rate hikes expected until late 2021 and the market will remain driven by the low interest and favourable mortgage loan terms with first-time buyers moving from rentals and others moving to a better house or neighbourhood, the market will remain well-balanced, favouring buyers, with prices under pressure and below-inflation growth, save for the sub-R1.5m which makes up 85% of current demand.
People who previously rented are now taking advantage of the lower interest rates. Cheaper borrowing costs are also enabling first-timers to buy bigger, more expensive properties than they might previously have considered.
Buyers are also becoming younger, but millennials are still somewhat averse.
We are typically seeing younger buyers now than we might have a year or two ago. Buyers are now often around 34 and up - a trend supported by home loan application statistics. Millennials still appear cautious when it comes to buying properties to live in, but they are becoming more amenable to investment buys.
The current buyer's market is seeing a recovery in housing prices, as SA's weak labour market and the uncertain economic outlook is still expected to impact the sector.
Until our economy recovers from the current pandemic, house price appreciation will remain low for 2021, reflecting a national average of roughly between 2-3% growth Year on Year
The March school holidays were around the corner but nobody could have envisioned the sudden staycation South African families are now finding themselves in the midst of.
We’re all on a mission to flatten the CoronaVirus curve, through self-isolation and social distancing.
So while the eight-hours of available child care many of us take for granted is no longer available, as schools and day-care facilities have closed – it’s time to put your game plan together for the next four weeks or so of being under home quarantine.
To start, develop a #StayatHome Family Charter highlighting each other’s strengths and weaknesses - as well as defining each person's expectations during this time of being in each other’s space, while trying not to be in each other’s space.
It will go a long way to stem any upcoming cabin fever.
If you haven’t done so already, it’s important for you to discuss the situation truthfully with your family, especially your younger kids who might have a lot of questions. We may think they’ve been properly informed at school – but sit down as a family, stem the panic by watching useful videos - What is Coronavirus Covid19, How can we stop it from spreading and What are the Symptoms is a good place to start.
South Africa’s official Coronavirus Covid-19 hotline – 0600 123456 - is the best source of contact and factual information to follow. Make sure you are doing this in an age-appropriate manner. Also, don’t be like Trump! Nip any discrimination or stigma about the virus in the bud. This is a great opportunity to teach our kids about tolerance.
As the next couple of weeks loom large, try a few of these suggestions to make the most if.
Set your daily routine!
Many have advocated to keeping to a routine of waking up early and being productive, as per normal. Don't succumb to the natural urge of snacking on all the stock-piled treats, all at once. If you’re up for it try one of the many #StayatHome challenges doing the rounds on social media. Ratchet up 3 000 burpees in 30 days. If you can’t do 100 all in one go, break it up into four sets of 25 that you and the family can tackle together during the course of the day. Or you may just want to teach them the Art of Yoga. Get a couple of stretches in first thing in the morning.
Balancing the act of working from home
Defining your office work space is a good start. While it will be difficult to keep the little ones at bay most of the time - setting this up, together with a workable routine that includes a couple of the below suggestions is going really help those parents who have to work from home. Have older kids? Why not encourage their inner master chef by getting them to get a head start on cooking the family meals. Do they love pizza and pasta? No better time to learn to make it fresh at home. Sure, it will be messy but that will be half the fun.
Schedule your entertainment
From Netflix to DSTV Now, streaming services that allow logins on more than one device are going to really come in handy. Three-hour long The Irishman? No problem. But what else is good to binge on? Create a WhatsApp review group to share the top shows and series you’re watching. Also check out this jam-packed entertainment guide from News24.
You can't go outdoors!
reviously we advised walks on the beach - this is no longer possible stick to your yard and stay safe - sunshine and vitamin D are instrumental to maintain a good immune system and can certainly help in the fight against Corona.
Go green in the garden
It’s the ideal time to transition your garden for the change of seasons from summer to autumn. You can all get your hands dirty mulching the soil or preparing bulbs. Show the kids how easy it is to create a terrarium or teach them about the wonders of spekboom. Over the next couple of weeks, you can drive home the soil to table concept by getting some easy-to-grow veggie seedlings in the ground - and then harvesting them a bit later down the line.
Reading books is a lost art
While you might have your own personal must-read list of books to get through, you can certainly spend a couple of hours reading with your younger ones. For your older kids why not stimulate their critical thinking by first getting them to read a popular book and then watch the movie version. Get them to share the changes they've noted; which version they preferred and why.
Free write some poetry or keep a journal
Taking the time to journal is a great means of self-reflection, as well as working through things we think we’re not equipped to deal with. Poetic expression could also be a creative outlet for a rather bleak time in the world right now. Make an evening of it as you all recite what you've come up with to each other. No judgies, no pressure. It certainly can be an interesting point of reflection once all of this is over.
Play “Elaborate reminiscing”
Similarly, the art of conversation tends to take a back seat to virtual chats and online things. Tap into developing your children’s memories creatively by setting a specific play time to include reminiscing. Get them to describe various holidays or notable experiences they’ve shared in the past. Where were they, what did they see, can they describe the sights and sounds. How did it make them feel and why? Ultimately, it will give you all the opportunity to relive the moment.
Organise all your digital photos
If your phone's memory is taking strain, then this is a must-do. Delete the unflattering selfies, keep the good-hair day ones or quirky smile shots. Sort them according to the then-and-now moments you actually want to have printed and framed.
Take a tik-tok challenge
Yes, it’s the latest craze amongst tweens these days, but since you're getting them to experiment with things that you mostly prefer, there is no reason you can’t join in on their fun. From doubling up in a dance duo to landing a cool bottle flip in the most unusual manner – your home quarantine will give you enough time to perfect it.
Learn a new language
While you might have had to put an international trip on hold this school holidays, and with good reason – you can still keep the excitement flowing by learning the mother tongue of the destination you planning to visit at a later date. Download Duolingo – and practice the simple sayings with each other from standard greetings to simple questions like, “Have you washed your hands?”
Finger paint or learn to do origami
From little paper butterflies to the symbolic crane, it will keep little hands busy. Anything that stimulates the mind will go a long way in helping to ease the frustration and boredom of being in the same space for an extended period of time.
Pick one room to do a complete make-over
With all the beautiful, creative keepsakes you’ll be making – you can take it a step further. Throw-out the things that no longer ‘spark joy’ and replace them with the things that do. Before tackling the room, have fun by creating a DIY vision board. Solidify the theme and style and then assign an element of the make-over to each family member so it can be a family project to be proud of.
Find a way to give back
Many of us have the luxury of working from home or being more in control of this crisis facing us than most. It’s still possible to help out during this social distancing phase. #CoronaKindness has taken on a life of its own and you can get in on it too. If possible, start by giving your char paid time off so they too can self-isolate without worrying about paying the bills. Get all family member hands on deck to do the daily chores. Otherwise, check on an elderly neighbour to see if you can get their shopping list done for them – they’re said to be most at risk right now.
The next couple of weeks won’t be easy, but we can do this.
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The arrival of the Corona virus COVID-19 to South Africa’s shores, as confirmed cases escalate, will only add to SA’s stalled economy, say experts.
The economy shrank by 1.4% in the fourth quarter of 2019 – as consumers remain under pressure. This with an interest rate cut in January, with the possibility of a further rate cut in March (with a COVID-19 fallout to intensify this prospect) - as Moody’s is set to make a call on downgrading SA’s credit rating on 27th March.
"We expect the virus' impact on the residential property market to be relatively small when compared to its effect on other key sectors,” says Andrew Amoils, Wealth Analyst for New World Wealth. He says sectors expected to be hardest hit by the virus will be “tourism, retail, mining, manufacturing and transport".
Erwin Rode, CEO of Rode & Associates property consultants also added the virus that has already affected the world economy as productivity suffers - largely due to China's shutdown - is sure to be "bad for the property market" too.
“In South Africa, it will affect some of our crucial commodity exports. What is bad for the economy, is bad for the residential and non-residential property markets, so it now seems likely that house prices will decline in nominal terms this year."
“The only good news is the price of oil that has collapsed,” says Rode. A price war has erupted between Saudi Arabia and Russia, with Brent Crude down some 30% a barrel on Monday. Fuel prices dropped by 19 cents a litre and diesel by 54 cents a litre on 4 March – but it is expected to be short lived as Finance minister Tito Mboweni announced an increase in fuel levies for South African motorists during his Budget 2020 speech.
The general fuel levy will be increased by 16 cents a litre for petrol and diesel, while the Road Accident Fund (RAF) levy will also increase by 9 cents a litre for petrol and diesel on 1 April 2020.
Overall, Investec forecasts SA's economic risk has increased in the face of rate cuts and a poor credit ratings.
Covid-19 is now expected to have a much greater impact on global economic growth than previously thought - with the International Monetary fund saying last week "global growth would dip below last year's rate of 2.9%".
While Investec’s severe down case for SA includes the impact of a severe global pandemic, it says a number of other factors must be considered as well in the scenario, "which remains an international led scenario impact on SA". It would reassess the impact once more conclusive data becomes available at the start of April.
"A global recession would necessitate a more severe downwards revision to SA’s expected case economic outlook. Moody’s includes a peer comparison basis in its rating of SA, and so an environment where all countries’ growth rates drop, and the IMF steps in with financial assistance, would likely need to be newly factored into Moody’s considerations."
"We continue to believe that it will be a very close call whether Moody’s downgrades SA’s credit, but marginally lean towards the chance of no downgrade."
Working out how much you can afford when buying a property is simple. Use a bond affordability calculator to understand what you can afford when buying a home.
An affordability calculator works out the home loan amount you can apply for. Your salary after tax, total monthly expenses, interest rate and loan term (years over which you will pay off your bond) are used to estimate the total loan amount you can afford with the monthly repayment amount.
Using the affordability calculator
As a general rule, you should look at spending no more than a third of your monthly income (after tax and deductions) towards your monthly bond repayments. Make use of a bond affordability calculator to understand what you can afford when buying a property. Calculate what you can afford using the Affordability Calculator.
Using the bond calculator
A bond calculator is used to calculate the monthly home loan installments and the interest added over the loan period. This will determine your affordability level by calculating your income against main bond variables and other monthly expenses. Calculate your monthly mortgage repayments using the Bond Calculator.
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The property sector has been at the mercy of Eskom and new measures being put in place will see growth in real estate values in the long-run. Welcoming both local and global independent sustainable power producers into the market will boost market confidence and see significant investments into South Africa. The question is, how fast can this happen, and can we afford to wait?
Uninterrupted power supply to Cape Town through the creation of its own power generation will see small businesses relocating from Johannesburg to Cape Town, while larger Johannesburg-based businesses would have already put plans in place to generate their own power”. Based on this, the prediction is a land price increase towards areas like Atlantis as a commercial hub.
The Real Price of Power Cuts
The replacement of equipment and increased maintenance due to power cuts is costing the industry. Increasingly, landlords are moving towards being sustainable and self-sufficient. If you are not making your portfolio sustainable then you are behind the curve. Today, tenants want to know if a property is equipped with a generator, solar power etc. and this has become a key selling point.
In addition, the news of Moody’s growth forecast down from 1 percent to 0.7 percent has once again placed a negative sentiment on South Africa. There is a lot pressure on the market and there isn’t a lot of growth to drive the market. We are seeing upward pressure on interest rates and a reduction of 25 basis points has very little impact on the industry.
Landlords want to see a clear decrease in interest rates. 100 points, for instance, will have a big impact on the industry. Landlords still have debt to service – regardless of whether they have a tenant or not.
Signs of Hope post-SONA
There are two additional key take-outs from President Cyril Ramaphosa’s SONA address to consider:
Land Expropriation: To a large degree, land expropriation has no impact on large commercial property owners, nor does it concern them. Where there is plans to develop land, we do not foresee it being taken away and don’t believe that there is any reason to panic”.
Infrastructure Investments: Talk of a smart city, a new university and a major dam to name a few will provide a much-needed boost for both the construction sectors.
That said this has been in the pipeline for years at Lanseria and is 'nothing new' he said.
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Homeowners have been urged to test their security systems as a matter of urgency and to pay particular attention to the battery backup systems. The message comes from an armed response company, as South Africa finds itself in the midst of wide-spread load shedding once again.
“Many people are under the incorrect assumption that their home alarm system is deactivated when the power supply is interrupted. However, if you have a stable and correctly programmed system coupled with a battery that is in good condition, it will continue to protect the premises during a power outage - regardless if the outage is because of load shedding or not,” says Charnel Hattingh, national marketing and communications manager at Fidelity ADT.
The only time it may not function correctly is if there is a technical issue, or the battery power is low. “Most modern alarm systems have a back-up battery pack that activates automatically when there is a power failure,” she says.
She adds that there are a number of practical steps that can be taken to ensure security is not compromised during any power cuts.
Some of these include ensuring the alarm system has an adequate battery supply, that all automated gates and doors are secured and, lastly, to remain vigilant and report any suspicious activity to your security provider or the police.
With the added inconvenience of the lights going out at night due to power cuts, candles and touch-lights are handy alternatives. Hattingh says home and business owners should consider installing Light Emitting Diode (LED) technology, which is integrated into the alarm system’s wiring and automatically switches on for a maximum of 15 minutes when there is a power outage.
“If there is an additional battery pack, the small, non-intrusive LED lights can stay on for the duration of the power outage - or a maximum of 40 hours without draining the primary alarm battery,” she explains.
The most important tips to remember about being prepared for a power cut are:
1. Your alarm system must have an adequate battery supply. Batteries should be checked regularly.
2. Alarms should be checked during extended power outages to keep systems running.
3. Power cuts can impact on fire systems and fire control systems, so these must be checked regularly.
4. The more frequent use of gas and candles can increase the risk of fire and home fire extinguishers should be on hand.
5. Above all, remain vigilant during a power cut; be on the look-out for any suspicious activity and report this to your security company or SAPS immediately.
“Because of load shedding, there might also be a higher than usual number of alarm activation signals received by security companies and their monitoring centres,” says Hattingh.
“This could lead to a delay in monitoring centre agents making contact with customers. You can assist by manually cancelling any potential false alarms caused by load shedding, and thus help call centre agents in prioritising the calls needing urgent attention.”
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The turn of the decade presents some interesting opportunities within the South African housing market.
As it stands, house price growth is slow and economic threats are plenty. Yet, after reviewing internal sales figures for 2019 and other industry reports, experts believe that the 2020 real estate market will hold as many opportunities as it holds challenges.
The weight of these challenges will be shouldered mostly by sellers as we continue to experience a buyer’s market where supply outweighs demand. The opportunity for sellers lies in when they choose to list their home. If, for example, they choose to list shortly after the announcement that interest rates have dropped to 9.75% (prime), they could capitalise on the potential uptake in buyers who are incentivised to take on home loans while interest rates are low.
Buyers too might enjoy the opportunity of securing a good rate on their home loan if they apply now while interest rates are low. Alternatively, buyers can take this time to improve their credit record by using the money they save on interest charges to lower their debts.
Beyond this, buyers are encouraged to capitalise on the fact that house price growth has been slow. Buyers should purchase now before house prices begin to grow at more unaffordable rates.
As much as the current market favours buyers, certain realities could also be used to the advantage of sellers. For example, by installing eco-friendly alternative energy sources to their home, sellers can choose to turn the ongoing crisis around our national power supply into an opportunity to add value to their home.
In terms of the challenges that sellers might face, larger homes are taking considerably longer to sell than in the past. The luxury market will continue to feel the pinch within this tight economy and the majority of transactions will continue to fall within the affordable price ranges. Sellers within this price bracket are therefore advised to partner with an experienced real estate professional so that the probability of their selling at full value will improve.
Similarly, buyers will continue to feel the pressure of the struggling economy which could hurt their chances of qualifying for a home loan and securing the necessary funds to purchase a home.
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This is how much the average house costs in South Africa – and why banks will offer favourable home loans in 2020
Data from home loan comparison service, Ooba, shows minimal growth of 1.8% in the average house price year-on-year from Q4 2018 to Q4 2019.
The average purchase price of first-time buyers performed marginally better, up 2.5% for the same period.
“Local residential property prices have experienced four tough years of flat to negative real growth.
Property price growth in 2020 is expected to perform in line with 2019 levels,” said Rhys Dyer, CEO of Ooba. “We anticipate nominal growth in the average purchase price of between 3.5% and 4% for the year ahead, largely tracking inflation.”
Dyer said that prospects for the residential property market during 2020 will be directly influenced by the ability for SA Inc. to ramp up economic growth.
“This year presents a key fork in the road for the economy. A ratings downgrade seems increasingly possible, exacerbated by the ongoing challenges facing almost all State-Owned Enterprises, particularly Eskom. The economy needs urgent and decisive action from policymakers to ensure much-needed stronger economic growth.”
The average purchase price climbed to R1.208 million, from R1.188 million in December 2018, while the average purchase price for a first time buyer climbed to R958,546, from R934,916. Ooba noted that the average age of a bond applicant is 38, versus 35 for a first timer.
Looking ahead, Dyer expects that the four key drivers of performance in the 2020 residential property market will be softer interest rates, improved property affordability, the banks’ favourable lending appetite and consumer confidence.
“The decision by the Reserve Bank this month to cut interest rates by 25 basis points will assist home buyers to meet their home loan and other debt repayments and will generate much needed consumer relief, which hopefully translates into improved consumer confidence,” said Dyer.
“Currently inflation is well within the 3% to 6% target range and this, coupled with the recent Rand strength, we expect will result in the Reserve Bank dropping interest rates further during the course of 2020.”
Despite economic and political uncertainty, local banks remained confident about the residential property market during 2019. Buyers took advantage of reduced deposit requirements, higher approval rates, historically-low interest rates and improved lending conditions.
Home loan approval rates increased, with Ooba showing a 2.4% increase in it’s approval rate from 80.4% in Q4 2018 to 82.8% in Q4 2019. Over the same period, the average deposit as a percentage of purchase price fell to 10.9%, from 12.0% in Q4 2018.
Banks continue to compete for new customers by approving finance at good interest rates, Dyer said. Ooba’s statistics for Q4 2019 show that the average interest rate was 13 basis points lower year-on-year.
“We envisage that local banks will continue to offer favourable mortgage finance terms during 2020, similar to levels experienced in 2019,” said Dyer.
“Banks are also increasingly granting loans of 100% and more of the purchase price to all home-buyers, not just first-time buyers. This will have a positive effect on liquidity in the property market and will in particular encourage more first-time buyers to enter the market.”
Dyer believes first-time buyers will make up a greater portion of total homebuyers in 2020 as they take advantage of lower interest rates, availability of finance and relatively cheaper property prices. This will result in the lower end of the market performing better than the upper end.
The top end of the market will likely remain subdued until much better news on economic growth and consumer confidence comes through, which is unlikely to occur to any large degree during 2020, Ooba said.
Given the bumpy economic road ahead, it is advisable for property buyers to shop around for the most competitive home loan.
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