How home buyers and sellers should approach the market in 2021? *Part 1 Buyers
Category Blog
Can the South African residential property market survive the months ahead beyond Covid and through the likely economic gauntlet?
In whose existing lifespan has the market been better for buyers than it is right now?
These two questions have no doubt been on the minds of many existing, and would-be, home buyers across the residential landscape of Johannesburg/Sandton.
The good news is that, right now, it is the best time in a current lifetime to buy residential property in South Africa!
Why? Because of the convergence of two key statistical records that favour buyers:
- The prevailing lowest interest rates in 50 years, and
- The current lowest home prices relative to the cost of a variety of items on which consumers spend money - such as motor vehicles and appliances.
The reality is that our country went into lockdown in a recession which is now in the process of deepening.
Furthermore, South Africa's up hill struggle increased by missing the first payment window for Covid Vaccine One and then discovering that the first vaccine that arrived on our shores needed to be returned - for substandard efficacy and early expiration date reasons.
These events have kept sentiment subdued and contributed to home buyer opportunities.
Against that background, seasonal home buying patterns will continue. The month-end of January, and the months of February and March are invariably busy. The trend is looking solid going into the first quarter of 2021.
The springboard for this pattern is that in December families (often on holidays or relaxing) tend to talk to each other more and plans are made and changed within that timeframe. Not least on the beginnings and endings of matters in their lives - such as leaving school and starting university; shifting into new jobs and careers; or moving home to a different suburb, town or city.
These seemingly inevitable seasonal lifestyle changes have always been abundant in the past. Unfortunately, the benefits they have previously provided are now being tempered by the circumstances, restrictions, and protocols of Covid Phase Two.
Nevertheless, the banks are still lending at a reasonable pace. Not least so because there is now stronger competition between them - particularly when it comes to market share.
What must be borne in mind in the process is that inflationary tail winds will follow. Quantitive Easing worldwide may even come to the fore - thus adding traction to the rate of inflation.
Meanwhile, opportunities continue to abound for would-be home buyers. Ideally, their best option is to visit at least 10 to 15 properties in their target areas in order to compare prices before putting in an offer.
There isn't an exact formula to determine the price of properties on offer - i.e. the difference between asking and selling prices - before putting in an offer.
The true value of a property cannot be determined by simply looking at the asking price. Furthermore, as a buyer you cannot simply say "drop it by 10 per cent".
The reality is that some homes are priced accurately, while prices of others may well be 10 to 20 per cent adrift.
Buyers must determine the reason for the home being up for sale. This will be a valuable guideline to a seller's flexibility.
Meanwhile, the trend at the moment shows that the best opportunities are in the middle-to-upper end of the market.
Unsurprisingly, prices are more accurately advertised at the lower or entry levels.
One final point: Find comfort in the fact that any residential sale, of existing property will probably occur at 20% to 30% below the replacement value in 2021! (i.e. the cost of the equivalent property newly built)
Author: Ronald Ennik
