Is it all about the money?

There is no question that the residential property market is due for a bull run. But, is it likely to happen now? Or soon? And, when it happens, will it be a strong bounce back? My personal response to these questions is positive.

Not least so because home prices in Johannesburg/Sandton are truly cheap right now. Home buyers generally invest with a medium-to-long-term perspective. Sellers, on the other hand, have short-to-medium-term needs, and therefore seek a quicker return. Could they do better by selling at current low market prices and investing the proceeds at interest rates ranging from 8 to 15 per cent?

Is it all about the money?

My answer is yes. In the current market, some medium-risk investment portfolios are achieving double-digit returns.Whichever way you look at the current homes market scenario, it raises  interesting debate.

Cash-flush banks

Consider that the banks are sitting with a lot of cash at the moment - a great deal of which could conceivably flow into the residential property market as 'wait-and-see' buyers become more and more confident and take the plunge. If the market stabilises as a result of some fresh and positive socio-economic and/or political factors, the already numerous home buy bargains currently on offer will multiply.

No wonder the banks have already extended their loan criteria and are prepared to provide 100 per cent loans up to R5-million. (Their ceiling was formerly R3-million).  At the lower end, the banks are even prepared to lend 105% of value - and pay the transfer fees in the process! They would not do this if they didn't believe that the value of the home would grow to cover the debt. 

A clear signal

That is surely a clear signal that the banking sector is anticipating an economic turnaround. And it bodes well for the currently more or less flat-lining residential property market. Home buyers usually transact with a medium to long term perspective. Sellers, on the other hand, tend to have short to medium term needs This raises pointed questions - not least because some medium-risk investment portfolios are reportedly currently achieving double digit returns.   If you think about it, why would the bank lend you 105% of the value of a house? Do they think right now that the asset they basically have 100% ownership of is poised to increase in value? Of course they do.

The pendulum swings

Against that background, people who aren't going anywhere, and have committed to South Africa, should absolutely do their best to buy in this market - now or soon - not least because the pendulum always swings. On the flipside, restless sellers should accept the knock, take the money, and make it up on the investment market.

The bottom line is that  the homes market remains lodged in a distinctly tough environment in which price aspirations of buyers and sellers - not to mention agents - should be tailored to suit the conditions. Good opportunities still exist right now to buy at an appealing price discount.  Buyers who ferret out, or stumble across, the home that suits their needs and lifestyle could do well by seizing the opportunity while it lasts.