Property World

TOUGH DECISION CAN PAY OFF

Downsizing will be easier to accept if you focus on what you will gain instead of what you might have lost.

THE DECISION to downsize is often not an easy one.

Those who have faced retrenchment or ongoing salary cuts should consider whether their financial situations could become more manageable if they chose to downscale, says Adrian Goslett, chief executive of Re/Max of Southern Africa.

“The process of adjusting to a smaller living space is filled with complicated emotions that are often easier to deal with when you have arrived at the decision willingly, rather than grudgingly as a result of the bank foreclosing on the property.”

Understanding that this is not always an easy decision to make, he says, the true saving in downsizing is not necessarily the profit from the sale but what homeowners stand to save on their monthly home loan repayments.

“Sellers might not get as much out of the sale as they had hoped after factoring in all the costs involved, such as the outstanding bond amount, agent commissions, and cancellation fees, but after moving to a smaller home, sellers will have more disposable income in their monthly budget to help them pay off debts or avoid debt in the first place.”

Another important factor is the money homeowners will save on maintaining a smaller home, Goslett says.

“Having a smaller space means that your electricity and water bills are likely to be much lower.

“If you had a large garden, you will also save on the costs of garden maintenance.”

INTEREST RATE MAKES FOR A BUYERS’ MARKET

Tenants should do the maths to see whether it is cheaper to buy than to rent.

AN ALL-time low prime interest rate of 7% continues driving tenants to become property owners.

“This is evident in the average age of ooba home loan applicants for Q3 of 2020,” says ooba home loans chief executive Rhys Dyer.

“On average, buyers are a year younger, down from 38 to 37 years, while the age of firsttime buyers has dropped from 35 to 34 years, compared to Q3 of 2019.”

Monthly bond repayments are at an unprecedented low and he anticipates that the current interest rate will remain in place for most of this year. He encourages tenants with leases coming up for renewal to seriously consider doing the maths and weighing up whether it is cheaper to buy than to rent.

“Of course, we still urge potential buyers to factor in rising interest rates over the years to make sure that they are covered for every eventuality,” Dyer says.

At the current interest rate, the following bond amounts will result in these monthly repayments:

• R750 000 bond R5 815 monthly repayment.

• R1m bond R7 753 monthly repayment.

• R1.25m bond R9 691.

• R1.5m bond R11 629 monthly repayment.

• R2m bond R15 506 monthly repayment.

• R3m bond R23 259 monthly repayment.

• R4m bond R31 012 monthly repayment.

LUXURY SEGMENT DID WELL LAST YEAR

House prices did not crash last year but, rather, remained stable or increased in some segments.

HOUSE-price inflation for last year ended at 3.05% as at the end of December, according to Lightstone Property’s most recent residential index.

The low, high and luxury value bands ended the year at about 2.5%, while the mid-value segment was 4.9%.

Contrary to expectations, the index report noted that housing prices did not crash during the year.

“On the contrary, the luxury segment that was trending closer to -0.5% at the end of 2019 is now growing close to 2.5% per annum. The mid-value segment has also added some speed, going from 3.6% to 4.9%, while the high-value segment has remained fairly stable at about 2.5%.

“However, It should be noted that the low-value segment has decreased from 10.2% to 2.5%,” the report says.

“At this point, it is difficult to point to the exact reason for the increase in the luxury segment and the decrease of the low-value segment.”

It could be due to the fact that the luxury segment is dependent on the interest rate, whereas the low-value segment depends more on economic growth.

House price inflation per province was recorded as follows:

• Mpumalanga 5.7%

• Eastern Cape 5%

• KZN 4%  North West 3.9%

• Northern Cape 3.1%

• Limpopo 3.1%

• Western Cape 2.4%

• Free State 2.3%

• Gauteng 1.9%

Sign a service guarantee deal with your agent

When awarding a sole mandate ensure there is a service agreement in place.

Selling your home via a sole mandate if often the best option for the quickest sale at the best price,but there is always the worry of an agent failing a seller.

If you are concerned about this, says Berry Everitt, chief executive of the Chas Everitt International property group, you should ensure there is a service guarantee in place when you award the mandate that gives you the right to terminate if the agent doesn’t perform according to the agreed marketing plan.

To get the most out of the relationship with your mandated agent, advises Adrian Goslett, chief executive of Re/Max of Southern Africa, first-time sellers should be as open and honest as possible.

“Never feel embarrassed to ask if there is something that you do not quite understand.As experts in their industry, real estate advisers are there to guide sellers through the process but they might not always think to explain the jargon they use.

“By being upfront with your agent and asking when you do not understand, you will be better informed and better equipped to navigate the process smoothly. ”