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I IIssue: September
2005 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.everitt.co.za
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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. What’s Better Than a Fixed Rate?
3. For
People Who Are Serious About Buying…
4. Buyers Have Rights Too
5. Dealing
With Seller's Remorse
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1.
Welcome By Publisher
Property prices may not be growing
as fast this year as in the past two years, but we
still don't see any reason for the “doom and gloom”
that seems to come so easily to so many real estate
commentators.
The latest Absa House Price Index
shows that despite the fact that the rate of house
price growth has now slowed to 1999 levels, owners
can still look forward to nominal growth of more than
20 percent this year – and after-inflation growth
of around 15 percent, which is hardly to be sneezed
at.
What is more, we can see clearly that
a slower rate of growth is giving more middle and
lower income people a chance to qualify for finance
and get into the property market. And this sector
of the market is also growing, due to the upward income
migration of households in SA.
This migration has been particularly
pronounced, Standard Bank notes in its latest Property
Gauge, among black households, with black middle-income
and high-income families now accounting for about
15 percent of all consumer activity – and having a
higher propensity to consume than the national average
because they are catching up an “asset backlog”.
For our part, we don't doubt there
is still rising demand. We have seen a huge upsurge
in buying activity in the past month, and feel confident
that this “spring tide” will turn into a summer flood
as an increasing number of South Africans are enabled
for the first time to become full participants in –
and beneficiaries of – the property market.
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2.
What’s Better Than a Fixed Rate?
With rampant hikes in oil prices and inflation edging
up, homeowners wary of increased interest rates are
asking themselves whether now would be a good time
to fix their bond rates.
Home loan interest rates have fallen steadily since
the end of 2002 to the current 10,5 percent “base”
rate and many economists predict they will start rising
again next year. But they also say, increases will
be minimal and are expected to peak at around 12,7
percent towards the end of 2007 before starting another
downward curve.
And if their predictions are on target, it begs the
question whether or not it is worth fixing bond rates
now, keeping in mind that banks usually peg a fixed
rate at one or two percentage points above the prevailing
rate for two years. At a pegged rate of, say 12,5
percent, homeowners fixing rates now stand to lose
a substantial sum over the next 24 months unless the
“base” rate suddenly rises more than two percentage
points.
A more profitable option would be to use the additional
cash required to pay the premium on a fixed rate loan
to reduce capital on the existing outstanding loan.
For instance, the monthly instalment on a R400 000
bond at a fixed rate of 11,5 percent would be R4264
compared to just R3996 at the current base rate of
10,5 percent – a difference of R268 that could be
paid into the existing home loan account every month
to reduce the capital portion, give the borrower leeway
to weather the small rate increases expected in the
next two years, and deliver long-term savings in interest.
New buyers may want to take additional precautions
against rate increases – and the simplest way is to
lower potential exposure by paying bigger deposits
to lower the loan amount, or to buy and less expensive
property.
Buyers who can afford, for instance, the R3996 monthly
instalment on a R400 000 loan at the current “base”
rate of 10,5 percent, can cushion themselves against
rate increases of up to three percentage points by paying
a bigger deposit and only borrowing R330 000. Alternatively,
they could buy a cheaper property and use the spare
cash to increase monthly repayments, thus reducing the
outstanding capital and saving a bundle in interest.
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3.
For People Who Are Serious About Buying…
Serious buyers should not waste their
time viewing overpriced properties in the hope that
they will be able to convince the sellers to lower their
prices.
Buyers who believe they can do so by
“driving a hard bargain” often accomplish little more
than driving the seller to decline all their offers
as a matter of principle – and would often have been
better off spending their time and energy looking at
suitable properties with a market-related price tag.
Indeed, buyers keen to make an offer
should steer clear of properties with an asking price
more than five percent above the going rate for the
area – which they can easily establish by asking reputable
local agents for a comparative market analysis (CMA).
Of course, this does not mean that
buyers should not be prepared to negotiate at all on
the asking price. If, for instance, they establish that
the seller is in a hurry to relocate, they could press
for a somewhat lower price in return for an expeditious
offer. Similarly, if the property will need some renovation
or repairs, it is quite reasonable to make a lower offer
to compensate for the expenses that will be incurred.
And on the other hand, buyers who
stumble on a real bargain – which they will instantly
recognise if they have been house-hunting in the area
for a while – should not waste time haggling. A genuine
bargain will not stay in the market for long and might
be snapped up under the nose of buyers dithering about
the asking price.
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4.
Buyers Have Rights Too
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Just as property sellers have the
right to expect that estate agents will protect their
interests, buyers have the right to ascertain that
their property investment will be protected.
And the only way buyers can determine
this is if they have access to important information,
such as why the property is being sold.
An agent's task will be easy if the
property is on the market because the owner is relocating
or needs a smaller house after retirement, but conflicts
of interest may arise if the reason is, for instance,
that planned developments in the area are likely to
create noise, pollution or traffic problems.
Agents facing such a dilemma should
remember that buyers do have to prove their bona fides
by satisfying the seller that they are able to afford
the property or obtain the necessary bond from a financial
institution.
By the same token, sellers – advised
by their agents – should make a clean breast of it and
honestly reveal their reasons for selling to prospective
buyers.
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5.
Dealing With Seller’s Remorse
Although not as prevalent as buyer's
remorse, some sellers are overcome by feelings of
doubt as soon as the contracts are signed - and start
contemplating cancelling the whole deal.
But they should take courage from
the fact that a measure of doubt is quite normal.
After all, selling the home where a family has shared
years of joys and sorrows is no easy task.
Add to that the stress of packing
up all your belongings, selling off items that will
not fit in the new home and having to find your way
in a strange community and environment, and you have
a sure recipe for lying awake at night. And it doesn't
help that money seems to flow like water.
Rather than impulsively cancelling
the deal, though – and possibly incurring severe legal
penalties – sellers suffering from remorse should
take a hard look at their original reasons for selling
and try to temper their outlook.
Even if it sounds trite, it does help
to view the experience as an “adventure” rather than
a “disaster”. There are also several steps sellers
can take to lighten the stress associated with moving
house, the first of which is to reserve some time
for family and fun. Setting time aside for relaxation
in a busy schedule is not frivolous – it is an investment
in your sanity.
Keeping a tab on finances and making
sure you have an emergency fund also help to calm
frayed nerves. Unusual expenses are inevitable, but
it helps to remember that most of them are once-off.
And, finally, it may be a good
idea to find out as much as possible about the area
you are planning to move to. Make a list of the attractions,
landmarks and cultural activities that may interest
you or family members. Once you can start looking forward
to exploring your new “territory”, the whole exercise
may lose some of its dread.
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