Paul Stevens On The Current Property Market
With lockdown still being a reality, many have wondered how it has affected the property market and how it will be affected in the months to come.
CEO of Just Property, Paul Stevens gives some insight into the current property sales market, what you can do if you’re struggling with repayments and why this is the best time to become a home-owner.
- What have the levels of distressed sales been like in recent months? And what do you perceive these levels to be like over the next 3 to 6 months?
Right now, the property sales market is buoyant, more so than expected and we hope that this is not a bubble that will burst in the coming months. We have seen incredible volumes in offers to purchase and reduced time-on-market in some areas, indicating that properties are priced to sell and people with access to cash and finance taking advantage of the low interest rate. Most buyers in our network right now are first time buyers, embracing the opportunity to get into the market. We have seen staggering figures from our Just Property Kalahari franchise, for example, where one of our best sales agents has secured 56 concluded deals in recent months, all awaiting registration in the Deeds Office. This sentiment is echoed across our franchise offices. We do not yet have robust tracking methodologies that allow us to identify what percentage of our deals are from distressed property sales. We are just beginning to see the long-term effects of the recent lockdown and its negative impact on commerce and affordability. Word on the street is dominated by news of retrenchments, business closures and economic disaster. If that is true, we can anticipate increased levels of distressed sales in the next 3-6 months. The lending institutions will play a major role in stemming the tide and we are keeping a close eye on their lending policies.
- What has been (and what will be) the trend for homeowners who are struggling to keep up with their repayments? Are they/will they look to downsize or rent?
There are a number of options available to homeowners who are struggling with their repayments and a shift to renting is not one that can be made easily or quickly.
A major consideration, often overlooked, are the 'hidden' costs of selling a property in South Africa. These costs include bond cancellation fees, compliance certificates, minor repairs and maintenance, municipal rates, levies (if applicable), moving costs, estate agents' commission and capital gains tax. It may be prudent for homeowners to renegotiate their finance arrangements, with options including payment holidays, extending the term of the loan to reduce monthly repayments, taking money out of one's access bond (if available), getting a re-advance, taking out a further home loan, restructuring the current home loan. "Switching" is a last resort too, where homeowners move their bonds from one lending institution to another.
Another consideration is the time it will take to sell a property. The time on market is hugely variable and the time for transactions to pass through the Deeds Offices is too, with the lockdown causing unprecedented circumstances and unforeseen delays. A move out of property ownership into renting is likely a 3-6 month process, at best.
Very often selling in a market like this would result in possibly selling at a loss if the property has been bought in recent years due to very slow growth rates in property prices. A more likely scenario than a shift to downsizing or renting is that homeowners may look to sub-letting a part of their property as a way to supplement their income. Properties with granny flats, outbuildings or unused rooms all provide an opportunity for this. Homeowners will need to be sensitive to local regulations, particularly if they own property in a sectional scheme.
- Generally, what are your predictions for the property market (both buyers and sellers) over the next 3 to 6 months?
It remains to be seen if consumers are going to put off buying a property because of increased uncertainty and a still weaker economy. The drop in South Africa’s repo rate to its lowest levels in nearly 50 years is good news for property buyers. There is talk of yet another interest rate drop in September. With businesses suffering, salary cuts and job losses, people still want to sell their houses, resulting in the buyers’ market expanding. This leaves a gap for buyers being able to acquire assets at a lower price than usual.
Repayments on prime-linked loans are lower which is good news for people financing their property purchases; the gap between the cost of renting and owning in certain segments of the market is closer than ever which makes property ownership more viable than renting for qualifying individuals. If you can access finance, there is no better time than now to become a homeowner.
- If you would like to add anything else on this please feel free to.
These are very difficult times to be making predictions as we have just come through something we have never experienced before and I think it is still very early to be making accurate predictions on where the property market is going over the next 6 months.
Stevens believes that responding to our current situation with positivity and pro-action is the best way to go. If you have always dreamed of becoming a home-owner, now would be the best time to take that first step! Read our blog post, ‘Steps Of Home Selling’ here.
For more information on Just Property please visit www.just.property or call (087) 550 2258.
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