Buyer interest in Eastern Cape homes

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12 Jul 2013

In a welcome turnaround for the Eastern Cape property market, interest among buyers looking for homes priced up to R1.5 million has surged this year.

The Nelson Mandela Bay property market is still tough for young professionals to enter, having to get credit of R800 000 or more, but banks are once again allowing bonds of 100 percent with costs for first-time buyers.

This is according to Jaco Rademeyer, principal of Jaco Rademeyer Estates, who saysdemandis picking up again.

He says more people are visiting properties and putting pen to paper. “The amount of deals going through is up by about 25 percent from last year and nationally the trend seems to be that a house sits on the market for four months before being sold, but here, if priced correctly, we are seeing properties move in two months or less.”

Rademeyer says Nelson Mandela Bay remained the province’s economic powerhouse in terms of residential property demand and interest among buyers has jumped to more than 20 percent so far this year.

He says business has doubled compared to the same period last year – a trend that was being experienced throughout the city to varying degrees.

“I deal with a lot of agents in town and many experienced a record month in April, which shows business is finally improving since the recession.”

The upward trend was reiterated in the First Quarter 2013 FNB Estate Agent Survey, which showed a noticeably stronger picture of domestic residential property demand nationally than the preceding quarter.

The exclusive Eastern Cape seaside resort of St Francis Bay is one of the unlikely players in the region’s residential property market turnaround, after devastating fires gutted 75 properties on the town’s pristine canals in November last year.

According to Rademeyer, the town is experiencing a property market boom thanks to the funds from insurance companies to rebuild the gutted properties.

The town’s property values are rising again as builders stream in for the construction of newer, modern homes along the sought-after canal. Some of the homes razed were valued at between R4 million and R6 million. This did not include the value of their contents.

This rejuvenation has made the town one of the province’s key property investment areas, he says.

“There is a property boom in St Francis Bay since the fires and the whole area’s property market has been dead since the recession in the late 2000s. Back then, the first property people got rid of was their luxury homes.”

Now , Rademeyer says they’re coming out of the recession, people are again looking at investing in lifestyle properties. He says added to that trend is the economic growth because of the rebuilding and contractors in the town have work and there is an influx of capital into the area. He says sales in that area are picking up again.

The Nelson Mandela Bay property market is still tough for young professionals to enter, having to get credit of R800 000 or more, but banks are once again allowing bonds of 100 percent with costs for first-time buyers.

“Their credit scoring needs to be excellent. If the bond does not include costs, buyers will also need to have saved about R40 000 to cover deposits and transfer costs. Not a lot of young professionals have that kind of money."

In the past, Rademeyer says banks guaranteed a 108 percent bond, but they are stricter about the criteria now.

He says this meant an increase in people choosing to rent, rather than buy and a subsequent uptick in people specifically buying homes to rent out.

There’s been about a 10 to 15 percent year-on-year increase in buyers purchasing a second home specifically to rent out and this is still a buyers’ market and smart investors are realising that things are about to change and that house prices are on the rise again, he says.

“They are snapping up houses now, while prices are low, mostly to rent out because of the strong rental market. But they will sell as soon as the property market picks up again.”

Rademeyer says he tends to see investors buying in the lower bracket, at around R500 000 to R600 000, as then rental will usually cover or nearly cover a bond repayment.

He says statistics showed that rental in the Bay ranged from R5 000 to R7 500 and average rental in Port Elizabeth has increased from R4 800 in January 2012 to R5 200 in March this year. 

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