The economic climate may have South Africans tightening their belts more than ever before, but if you have been thinking about buying a home – or even a second property, it may not be a bad idea.
In fact, tough economic times generally favour buyers.
House prices are under pressure and stock usually outstrips demand, meaning you will have a wider option of properties to select from.
Read our latest Property360 digital magazine below
You do still need to be cautious though, as MortgageMe director Andrea Tucker warns that being too bullish may result in you over-extending yourself, and then becoming a desperate seller.
“There are always a number of material and financial considerations that need to be weighed up before rushing into a house purchase.”
If done correctly, the current market “could be one of the best times to buy”, says Seeff Property Group chairman Samuel Seeff, explaining that the current climate feels similar to the period before the 1994 elections and the 2008 global financial crisis.
“Those who had bought in 1993 or 2006/7 with the perceived risk at the time, subsequently benefited greatly from good capital growth which followed.”
He adds that the interest rate will also come down again.
“Prices are flat and the banks are still lending, albeit that buyers will have to budget for the higher rate right now. He says staking your claim in the property market right now could very well stand you in good stead.”
Preparing your finances to buy a home
If you feel that you are ready to buy a property now, you need to draw up a budget, Tucker says.
“This means not only deciding how much you can afford to spend on a house, but calculating all the ancillary costs including transfer costs and other fees. Make sure to calculate what you can afford monthly now plus two additional rate increases to get a realistic view of your affordability.”
You should then get pre-approval for your home loan before you go house hunting, as this will give you additional leverage in any negotiation. Furthermore, when you are shopping for a mortgage, you should put down the biggest deposit you can as banks and financial institutions will look more favourably on your application the less risky it is.
“With banks looking for quality credit customers in these times, you are in a position of power to negotiate the best interest rate possible.”
It is also crucial to conduct thorough research regarding the associated expenses at that particular bank, she says.
“Consider comparing transaction fees against the savings on your home loan. Otherwise, you may find yourself in a situation where your monthly transaction fees exceed the amount saved on your home loan. Additionally, ask your bank for a fixed and variable interest rate, and weigh up all the pros and cons of each over the period quoted, and how either will impact your expense budget going forward.”
The best suburbs to buy a home
Your next step is to consider which suburbs you can afford to buy in. In a buyers’ market, it’s worth looking at houses or suburbs that may previously have been slightly out of your price range, as many homeowners are reducing their asking prices to effect quicker sales.
“If you can afford to buy in a better suburb, your investment will pay off when the market recovers, which it always does,” Tucker notes.
The South African real estate market continues to be dynamic and diverse, and there is a strong demand for properties in suburbs that offer a mix of lifestyle benefits, robust infrastructure, and promising growth indicators, says Richard Gray, chief executive of Harcourts South Africa.
Some of these areas include the coastal suburbs of Cape Town like Camps Bay and Clifton, thriving urban centres such as Johannesburg's Sandton and Rosebank, and the picturesque Garden Route locales like Knysna and Plettenberg Bay.
"A key trend we've observed is the increasing appeal of suburbs offering a balance of urban convenience and access to natural beauty. These locations offer a unique blend of work-life balance that is becoming more and more important to buyers."
Also in the spotlight are suburbs with strong potential for investment returns, he adds.
“We're seeing increasing interest from investors in up-and-coming suburbs, where infrastructure development and urban regeneration projects are underway. These neighbourhoods present exciting opportunities for long-term growth."
Once you have decided on the areas you would like to house hunt in, Tucker advises that you then get to know the real estate agents that operate in these areas as they have all the local knowledge. They know the price patterns, average rates and taxes, and the catchment for schools.
“You can also be proactive and set up alerts on property portals that will send push notices of properties that match your search criteria, which will save you hours of scrolling.”
Best features to look for in a home
While you may have set your heart on having certain features in a home, she says it is wise to draw up a ‘must have’ and ‘nice to have’ list and keep this in mind when you go and look at houses.
“This will help keep the emotion out of your eventual decision, as you make a pragmatic choice based on factors that influence an asking price. For example, a pool, which is a ‘nice to have’ might be the reason the house is out of your price bracket, and you have to let it go.”
You should be aware of so-called ‘estate agent speak’ when looking at properties. Photos will show a house to its maximum advantage, and the vocabulary of the adverts will sometimes exaggerate the home’s features. In this case, you should never set your expectations too high, to avoid disappointment.
“If you are thinking of buying a ‘fixer-upper’ consider the long-term financial implications of renovating. These are the kinds of expenses that can lead you into unanticipated debt.”
Another critical factor to check is whether there are sitting tenants in the property, especially if you have taken advantage of a forced sale that has gone through the courts and effectively been repossessed by the bank. If you are buying in a complex, check the rules and regulations of the body corporate.
“Taking advantage of a buyers’ market can get you a great purchase price on a property you might not otherwise have been able to afford. However, all the other pros and cons, pitfalls and things to look out for apply, even if you have closed the best deal ever,” Tucker says.