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I IIssue: June 2006
I Editor: Berry Everitt I |
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Your Area Specialist:
Chas Everitt International
sales agents have all the latest market information
regarding local property values at their fingertips
– and are committed to the highest standards of
personal service when it comes to selling your home.
In addition, the Chas Everitt International property
group offers you, the homeowner, the best possible exposure
for your property in both national and international
markets. So if you are thinking of selling your home,
call your nearest Chas Everitt International office
today for the name of your local area specialist - or
visit www.chaseveritt.com
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Every month the Property
Signpost Newsletter will be issued to all our
subscribers, filled with real estate information to
help you make an informed decision, whether you are
buying or selling a property.
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Contents
1. Welcome
By Publisher
2. US market
will not snap, crackle or pop, Harvard study shows
3. Buyers:
Time to jump right in
4. Borrowers:
Get an early start on a good credit record
5. Sellers:
Stay away from the Big Four
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1.
Welcome By Publisher
Nationally, home sales volumes are
falling and property prices are rising much more slowly
than in previous years – but I am happy to say
that is not the scenario in the Chas Everitt International
group.
On the contrary, turnovers for the
past three months in most of our branches are substantially
up on the same period of last year, and the total
value of sales for the group has increased by 95 percent
– without taking into account the revenue being
generated by the new branches opened this year.
How is this possible? Well, the average
house price is higher than at this time last year,
but the real reason is that most of our established
franchises are going against the national trend and
showing a continual increase in the number of sales
being achieved.
In short, they are gaining significant
market share wherever they operate – and the
reason for that is that more and more home sellers
are discovering and coming to appreciate the real
value of our outstanding service offering.
This is a function of the fact that
sellers generally are finding out that while the careful
choice of agent is not that critical during a boom,
it is absolutely vital in a slower market, and rapidly
becoming much more discerning. Which puts us right
where we want to be, because unlike many others, we
have the skills, the technology, and most of all the
desire to achieve sales all the time, not just in
the good times.
As they say, when the going
gets tough…
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2.
US market
will not snap, crackle or pop, Harvard study shows
Homeowners and investors alarmed at speculation
about what would happen to the SA housing market in
the event of a major shake-up in the US market can
relax.
According to a report just published by the Harvard
Joint Centre for Housing Studies - the leading source
of information and research on housing in the US –
“sharp drops in house prices are unlikely anytime
soon”.
The State of the Nation’s Housing report, published
annually, acknowledges that with interest rates rising
and speculative demand cooling, house price growth
will likely moderate in many areas, but says that
the market overall will achieve a soft landing as
long as the economy continues to create jobs and builders
cut back projects to meet slower demand.
It points out that major house price declines seldom
occur in the absence of severe overbuilding, major
job loss, or a combination of heavy overbuilding and
modest job loss, and notes: “Fortunately, these
preconditions are nowhere in evidence across the nation’s
metropolitan areas.”
In fact, the Joint Centre says, strong household
growth combined with record incomes and wealth is
expected to lift housing investments to new highs
over the next decade.
It does caution, however, that five years of unprecedented
house price appreciation and decades of land use restrictions
that make building affordable housing difficult are
adding to widespread housing affordability problems.
“The paradox of today’s housing market
is that while more people are building home equity
than ever before, slow growth in wages for households
in the bottom three-quarters of the income distribution
is not keeping pace with escalating housing costs.
It is currently impossible to build new housing at
prices that low-income households can afford without
subsidies,” the report says.
In this regard, says Joint Centre director Nicolas Retsinas,
the major difficulties are slow growth in domestic discretionary
spending at the federal level and the reluctance of
state and local governments to relieve intense barriers
to the production of more affordable housing. “And
unless they can be solved, spending on housing will
increasingly crowd out spending on pensions and savings
among those with low and even moderate incomes.”
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3.
Buyers:
Time to jump right in
First-time buyers should not let the
recent 0,5 percent interest rate increase put a spoke
in their plans to become homeowners. In fact, they should
take it as a signal to accelerate those plans and get
into the market as soon as possible.
Here’s why: Let's say you're
interested in buying a home that costs R500 000, and
can negotiate a one percentage point discount on the
current mortgage base rate of 11 percent. If you buy
now, your minimum monthly repayment on a R450 000 loan
(after a 10 percent deposit) would be just over R4500
a month.
But if you wait, hoping that interest
rates might drop back again, still-rising property prices
and building costs could easily elevate the cost of
the home you want to R540 000, R550 000 or even R560
000 by this time next year. That means you'd need more
cash for the deposit, and a larger loan.
Even if property prices were to rise
only five percent, you’d need to borrow R472 500
instead of R450 000. This would push the minimum monthly
repayment up to around R4725 – and the income
qualification level from R15 000 a month to R15 750.
And this does not take into account
the rent you'll be paying for another year instead of
starting to pay off your home loan, or the probability
in the light of the weaker rand that interest rates
will actually go up again this year, which will also
make it more difficult to qualify for a home loan.
Because of the recent interest rate
increases, potential buyers may be thinking that they
ought to pay off or at least significantly reduce all
their other debts before taking on a home loan. But
while that sounds like a responsible idea, it may not
make long-term financial sense, especially if your current
debt load is not excessive for your income.
Indeed, if homeownership is in your
future, you should not let the current interest rate
dampen your enthusiasm, as every delay in your decision
to buy is likely to prove costly.
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4.
Borrowers:
Get an early start on a good credit record
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An immaculate credit record is almost
as good as cash in the bank. At least, that’s
the way most lenders seem to see things, because the
first thing they will do on receiving an application
for a home loan is research the would-be borrower’s
credit history.
This means that for most homebuyers,
the process actually begins years before any decision
to purchase a property, and it is why good management
of monthly accounts and hire purchase debt are important
even for young people who have no immediate plans
to buy a home.
In fact, it is never too early to
start building a healthy credit record and a good
first step is to open a savings or cheque account
in your own name, keep it balanced and ensure that
you do not overrun credit limits.
A good recommendation for any home
loan applicant is also to have a history of regular
repayments, on time, of store card and credit card
debt, as well as of credit advanced for a major purchase
like a car.
Meanwhile, the new Consumer Credit
Act provides for lenders to ensure, before they grant
any new credit, that borrowers will not be committing
too much of their income to debt repayment. So they
have to compile a complete debt profile including
all other repayments the consumer has to make –
such as car, furniture and credit card instalments
– before they can approve a home loan.
However, this is not the only good
reason to keep the total of your monthly debt repayment
obligations to 50 percent or less of your income. Doing
so will also give you plenty of leeway to cope with
any future interest rate increases.
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5. Sellers:
Stay away from the Big Four
Whatever the reason
for selling your home – a sudden life change requiring
a fast move or a more leisurely plan to retire and downsize
- you will want to make the most favourable deal and
the most money possible from the transaction.
And to do that you will
need to steer well clear of the Big Four – the
mistakes most commonly made by home sellers.
The first of these is
choosing an agent based on the price at which he or
she is prepared to list your home. Good agents will
prepare a comparative market analysis, examine your
home and size up the competition in the area, and their
sale price estimates will most likely fall within a
narrow range. Only the inexperienced or unscrupulous
will offer to sell it for a much higher price.
The other serious errors
are:
* Choosing an agent who only advertises in the local
market. To have the best chance of being sold quickly
and at a good price, your property must compete successfully
for the attention of buyers increasingly exposed to
international as well as national advertising in a wide
variety of media.
* Failing to prepare the home for sale. This can include
everything from spring cleaning and clearing out clutter
to repainting and making repairs, and it’s hard
work. But to sell, your home must compare favourably
not only with others of a similar age and price, but
also with mint-condition new homes.
* Refusing to negotiate. You will
seriously lessen your chances of a successful sale unless
you are prepared to weigh the market feedback from your
carefully chosen agent, and to at least consider the
transaction from the buyer’s point of view.
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