Western Cape property buyers and tenants continue to be attracted by CBD fringe properties to avoid traffic commuting problems, say estate agents.
This property is being rented out by a family for R9 900 per month and is on the market selling for R1 475 000 through Rawson Properties Observatory franchise. Property prices in Observatory according to Lightstone survey have risen by 20 percent since 2006 with the average growing from R800 000 to R1 050 000.
Rawson Properties predicts that traffic congestion problems will make CBD fringe properties popular with home buyers and tenants as well as boost home prices.
According to Craig Gilfillan, Rawson Properties franchise for Observatory and Woodstock in Cape Town, residents in the areas spend a maximum of 15 minutes in peak traffic and about five minutes in less traffic to drive to town.
He says the City Improvement District initiatives which through its many activities provides services such as increased security within the community, street patrols, street sweeping and graffiti removal have had a big impact on the area making it more in demand from buyers and tenants.
Since the beginning on 2011, Gilfillan explains that they have sold four houses per month and in July the number went up to seven.
Property prices in Observatory according to a Lightstone survey have risen by 20 percent since 2006 with the average growing from R800 000 to R1 050 000.
He reckons that by 2013, the average property price of R1 050 000 will rise to R1.2 million.
He notes that annual property sales volumes fell to 125 from 280 between 2006 and 2007 and this is certainly starting to improve.
“There are few apartments in Observatory and Woodstock, these prices are mainly for freestanding two and three bedroom homes which by Cape Peninsula standards, are exceptionally well priced.”
Buy-to-let investors in this area are guaranteed a steady income and stream of tenants with properties achieving very good rentals.
He says a typical three bedroom unit selling for between R1 million and R1.4 million commands rentals of between R8 000 and R9 000 per month.
“We manage some 50 properties in the area and finding tenants is not a problem, in fact, tenants are the ones looking for us.”
He says the area is part of the University of Cape Town academic belt and popular with upwardly mobile young couples who appreciate the café, bistro, cosmopolitan lifestyle it offers.
“Recently, buy-to-live have far outnumbered buy-to-rent investors – but I think that will change.”
The banks, he says, look favourably on Observatory and Woodstock as an ideal property investment area.
Estate agents report that because of the banks positive attitude towards property investments in Observatory and Woodstock, up to 90 percent of home loan applications have been successful and about 10 percent of these have been 100 percent bonds.
Gilfillan adds that the Observatory property market always performs better than the average in lean periods and emerges faster from those periods as well.
With banks now approving many home loan applications and the low interest rate environment,homeowners can take advantage of a fixed interest mortgage rate, which can effectively save them money over the long term.
Eleanor van der Merwe, Inland Regional sales manager at ooba, South Africa’s leading bond originator says now is the time to fix your home loan rate.
“The current prime interest rate of 9 percent is at a 30 year low and the general sentiment is still that South Africa will move into an upward interest rate cycle next year.”
Van der Merwe explains that the main advantage of having a fixed home loan rate is that home owners can budget with a degree of security knowing that rate increases over the contract period will not affect their ability to meet their debt obligations.
A typical affordable family home in Observatory recently sold by Rawson Properties Observatory at a price of R1 950 000. The banks, he says, look favourably on Observatory and Woodstock as an ideal property investment area approving up to 90 percent of home loan applications.
“Fixed rate home loans provide peace of mind and security to borrowers, knowing that they don't have to worry about future interest rate rises.”
She says to qualify for a fixed rate the home loan in question will need to have been registered as a fixed rate will not be quoted by a bank prior to registration.
Banks are at the moment offering fixed interest rate mortgages on a prime plus basis as it costs them to hedge the interest rate risk.
“A lender’s fixed interest rates for a 24-month term currently range from 9.3 percent to 11 percent.”
Homeowners are usually prepared to pay a slightly higher interest rate for the added security and knowledge that their repayments cannot increase during the term of the fixed rate agreement. Usually the maximum term for a fixed interest rate is two years.
Homeowners currently on a variable rate can change to a fixed rate option on condition that their home loan repayments are not in arrears.
If the loan is in arrears, the arrear payments will have to be rectified before applying for a fixed interest rate.
When considering a fixed interest home loan, potential home owners should conduct a sensitivity analysis on what interest rate increase they are able to absorb. This will deduce if the fixed rate is a suitable option.
“A careful assessment with a professional advisor and the comparison of options will verify if the home owner will benefit from a fixed rate.”- Denise Mhlanga
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