Low property prices lure home buyers

31 Aug 2011

Lower property prices are reportedly making it possible for savvy investors and buyers to enter the property market in some parts of the country.

In the Southern Cape city of George, the holiday destination and retirement retreat, buyers are snapping up great purchases especially those keen to downscale.

According to Sotheby’s International Realty, in the boom years from 2003 to 2008, prices rose rapidly in George and nearby towns such as Wilderness, Sedgefield as well as in the luxury golf estates dotted along the Southern Cape coast.

Tim Kirby, owner of the Sotheby’s International Realty franchise in George says at the time, the whole area essentially became a playground for the affluent with plenty of money to spend on upmarket second homes.

“But now, in the aftermath of the recession, it has become much more accessible for those of average means, including locals who previously could not afford to buy their own homes here,” says Kirby.

Kirby explains that when the credit crunch hit the South African shores, this caused the second-home market to collapse. As a result, many homeowners who needed or wanted to sell their existing properties in George and the surrounding areas had to lower their prices.

According to the FNB Estate Agent Home Buying report Q2 2011 (Western Cape) , the estimated percentage of sellers being required to drop their asking price rose to 98 percent in Q2 2011 up from 96 percent in Q1 2011.

This is the highest percentage on record since the survey started. The report suggests that there is a possibility that sellers may be putting their homes on the market in greater numbers than was the case when interest rates were high and economic times were far worse than the present.

Lock-up-and-go holiday homes on the coast will become increasingly hard to find in years to come and are a good longer-term investment in George.

The estimated percentage by which sellers had to drop their asking price was -10 percent from an estimated -11 percent in Q1 2011.

Thanks to the lower prices currently being experienced, older homes in George are priced from around R850 000 to R1.2 million. Kirby says there is no shortage of potential buyers and well-priced properties in this range are selling quickly.

Kirby says buyers looking to buy into gated estates can easily buy serviced stands in secure estates for less than they originally cost. Prices range from as little as R80 000 to about R650 000.

Buyers are also said to love the lock-up-and-go holiday homes on the coast which, he says, will become increasingly hard to find in years to come. The shortage will be in locations such as the Wilderness due to development restrictions in the Southern Cape and new coastal building legislation.

As an example, he says, of what is currently being considered an excellent longer term investment of this kind are 14 three bedroom units in the secluded Wilderness Milkwood gated estate selling from R1.2 million each. 

The Fynbosstrand sea-farm development near Still Bay offers stands priced at R750 000 while built homes in the Cape fisherman cottage style sell for around R3.5 million.

Buyers are also reportedly buying quite aggressively in some parts of Cape Town’s luxury suburbs.

It is not only the Cape that reports increased market activity as a result of lower prices. In the small North West town of Stilfontein, buyers from neighbouring towns are getting good deals at very low prices.

Pierre Ludick, co-owner of the local RealNet franchise says in Stilfontein, it is still possible to buy a three bedroom mine house in good condition for between R350 000 and R450 000.

First-time buyers from Klerksdorp and personnel for the University of Potchefstroom make up the bulk of buyers in Stilfontein. Properties in Klerksdorp are pricey compared to Stilfontein.

Ludick says even at these low prices and some would-be buyers getting state housing subsidies, banks are extremely reluctant to grant bonds without a deposit of at least 10 percent of the purchase price.

“To buy in Stilfontein, one needs to save around R40 000 plus R20 000 for bond initiation and registration as well as the legal costs of transferring the property,” says Ludick.

Three-bedroom houses like these can be bought for between R350 000 and R450 000 in Stilfontein.

In Klerksdorp, he reports an increase in demand for two bedroom townhouses priced at around R1 million from young professionals. These buyers are generally busy and they look for low maintenance units as opposed to suburban homes.

“We find that there are also many travelling representatives in Klerksdorp buying into secure complexes,” says Ludick.

In Pretoria, sellers are said to be more willing to bring their properties into the market and are finding willing and qualified buyers to purchase.

Goran Despot, of RealNet Erasmuskloof in Pretoria says there is a noticeable demand for property in the area with townhouses selling quickly as they are believed to be affordable and offer sound value.

These are priced between R600 000 and R800 000 for two bedroom units while three bedroom units are priced between R1 million and R1.4 million 

Despot describes Erasmuskloof as a young suburb offering a variety of properties and a range of prices to suit all sorts of buyers. There has been an uptick of activity in the full title properties priced between R1.7 million and R4 million, adds Despot. – Denise Mhlanga

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