Property buyers, sellers, landlords and tenants have to face new realities
Category News
While it is true that the Western Cape continues to be the top performer in the South African residential property market, often far outpacing other provinces such as KwaZulu Natal and Gauteng, those people dealing in this sector must beware of allowing their expectations to become detached from the realities of today’s situation.
Encouraged by spectacular price increases of in, some cases, 10% or more per annum, said Rowan Alexander, Director of the new Brackenfell headquartered company Alexander Swart, many estate agents continue to talk up and exaggerate the strength of the Cape market. It is absolutely true that this is still a very good place to buy and further price increases are likely. However it has to be recognized that our figures show that from the start of this year on an annualized basis value rises have been around 10 %, i.e. 2-3 % lower than in previous years. The 2% interest rate rises of the past three years and growing inflation have made the potential buyer’s decision a great deal more difficult than it was only a year ago.
Three years ago, said Alexander, a buyer earning R58,000 per month might qualify for a bond of R2 million. Today, supposing his income has remained at much the same level, he would find that he is eligible for a bond of only R1,735,000. In the same time period a R2 million house might have increased in value to R2,550,000, i.e. by 9.5% at a conservative estimate. Bearing in mind that wage increases over the past three years have not risen at anything like the same rate enjoyed by property prices, it is clear that today’s buyer faces a tougher situation than he did only a few years back..
The hard reality, said Alexander, is that salaries are in general rising slower than home prices. This, combined to inflation and rising interest rates, has made it essential for buyers to re-assess their position and expectations – but we find that many are unable or unwilling to do this.
In the rental market, added Alexander, difficulties regarding the purchase of homes traditionally resulted in a greater demand for rental properties. Even here, however, he said, achievable rental prices and returns per annum in the Brackenfell area (which is typical of most in Greater Cape Town) have been reduced to around 8%, especially in homes renting above R15,000 per month.
Landlords are still on a good wicket, he said, but they, too, have now to face the realities of today’s more difficult market.
Below R15,000, said Alexander, demand remains good but landlords are likely to be faced with tougher conditions and these could prevail for several years to come.
For further information contact Rowan Alexander on cell phone number 082 581 3116 or by email rowan@asproperty.co.za.
Author: Independent author
