Home Buying Activity to Increase

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25 Jul 2012

South African estate agents report that an interest rate cut will see home buyers return to the property market and sales are expected to increase.

Geffen says they expect to see a significant increase in home buying activity in the next few months as the effects of the decrease filter through.

Last week, the Reserve Bank Monetary Policy Committee reduced the repurchase rate by 50 basis points to 5.0 percent and prime rates will be 8.5 percent.

Read the article here.

Lew Geffen, chairman of the Sotheby’s International Realty in SA notes that they have already experienced a 15 percent  increase in sales volume this year to date and a 10 percent increase in turnover, an indication of a market recovery,

He says the rate cut will lower the affordability barriers for first-time buyers and also make it easier for existing homeowners to qualify for their next home loan so that they can sell and upgrade to more expensive properties.

“Most importantly, the rate cut will boost consumer confidence, which is vital for the continued recovery of the property market.”

Geffen says they expect to see a significant increase in home buying activity in the next few months as the effects of the decrease filter through. 

Jan Davel, managing director of the RealNet estate agency group, says interest rate reduction should mean less distressed properties in the market.

Davel points out that the immediate effect of the rate cut will be to reduce the number of homeowners who find themselves in such financial distress that they either default on their home loans or are forced to sell - and thereby to reduce the number of distressed properties coming on to the market and depressing property prices.

For would-be home buyers, the lower nominal home loan interest rate will make it easier to qualify for home loans.

He too expects to see increased buying activity and faster absorption of the oversupply of stock in the market.

Davel says now is the time to buy property especially as rentals in many areas are now at the same level as bond repayments for similar properties.

Seeff chairman, Samuel Seeff says the rate cut will encourage would-be buyers who have been believing that prices are unlikely to drop further to any significant degree in the next year, that those with the means to buy, should do so now.

“Buyers are in a strong position to negotiate and sellers who hope to conclude a successful sales transaction will need to continue to price conservatively,” he says.

Rawson Properties is selling a one bedroom Flamingo Vlei home for R495k.

Investors looking to sell for a handsome profit, will need to wait a bit longer, says Seeff.

Buying property

With interest rates cuts, Rawson Properties points out that in the Western Cape, Rondebosch, Rosebank, Mowbray, Claremont and Kenilworth areas continue to be highly valued and sought-after by a number of buyers and are able to ride out recessions well. 

 According to George Hayes, Rawson Properties franchisee for these areas, these suburbs have some of South Africa’s top private and state schools (including the new Madras School in Landsdowne Road). 

Hayes says on its fringes in Rondebosch East and Kenwyn (not strictly speaking central Southern Suburbs but always popular) the majority of homes are still selling in the R700k to R1.5 million, in the academic belt, sectional title apartments are sell from R 500k to R 3 million and in Kenilworth, Harfield Village and Lynfrae, always popular with young and middle aged families, (particularly if the homes are reasonably close to a school), prices can be anything from R 700k to R5 million.

He predicts that the popularity of the central Southern Suburbs will ensure that price rises, which although steady have over the past two years been unspectacular, will increase faster over the next 12 to 18 months. 

Mike Abrahamse, franchise principal for Rawson Properties’ Blouberg franchise and co-franchisee with Daphney Klopper for the Table View franchise report a surge in demand for investment properties in Table View and Parklands.

Abrahamse notes that the demand and uptake of available stock will soon make it impossible to buy a home in Table View priced under R400k.

He explains that even when buying on a 100 percent bond, in Table View and Parklands, it is possible on certain purchases to get positive net rentals income from an early stage.

As an example, he says one can easily buy a half bedroom home in Table View for R330k while in Parklands the same home would cost R490k.

Compared to other suburbs in Cape Town, Abrahamse says homes in these areas are still reasonably affordable, close to beaches and within commuting distance of the city and the northern suburb city nodes. 

“Homes here are still available at really affordable prices – but they are now recovering steadily and today’s excellent prices will, I predict, not be obtainable for more than another six months,” says Abrahamse. –Denise Mhlanga,

About the Author
Denise Mhlanga

Denise Mhlanga

Property journalist at property24.com

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