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Stay in the market
Property 24.com
03 July 2008
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As many South Africans juggle costs to try and keep up with their bond repayments in the face of increased interest rates, they should do whatever they can to stay in the property owners' market.
PGP's managing director for the Western Cape metro region, Laurie Wener, says these may be difficult times for property owners, but they should keep in mind a long-term view of their investment.
"Yes, some owners can no longer afford their existing bond repayment plan, but there is no need to rush into a sale. While it may seem more cost effective to move into the rental market, they should remember that getting into the ownership market in the first place is quite likely to be their biggest financial leap. It would be a pity to have achieved this leap, then to go back to square one and have to face it all over again in a few years' time.
"We would strongly advise people in this situation to rather consider buying down than selling out. If this is the property in which you live, it may mean compromising your lifestyle for a while, but it will make the path back upwards again much easier.
Wener further advises homeowners to talk to their financial institutions before panic selling.
"If your mortgage repayments are too steep to cope with, don't underestimate your bank's willingness to help you. Most banks would far rather restructure a payment plan than repossess a property. You may find that you can extend the term of your loan, thus reducing the monthly repayment amount – or if it will assist your cash flow, you can request a three-month 'payment holiday'. Whilst these measures will increase your interest and total debt over the long term, they may allow you to keep your home.
"And of course, it is likely that you will sell the property well before the term is up, when there has been good capital growth. The bottom line is that one should make keeping up your bond repayments your number one priority, even if it means sacrificing luxuries for the time being."
Wener says that those who do opt to downscale, may well find a better selection of properties than there has been in years. "Current market conditions provide good opportunities for shrewd investors. Cash buyers are at an advantage again for the first time in many years, as the cash offer has a distinct advantage to the seller over an offer subject to a mortgage loan in the current climate."
In Cape Town, the City Bowl area is a good case in point. It is currently possible to obtain a studio or bachelor apartment here for R650k – whereas for the last few years, prices under R750k were unheard of.
Wener points out that if one takes a long-term snapshot of the South African property market, it is clear that there has been at least 15% growth per annum in property prices over the past ten years, on a compounded average basis.
"There is no reason to panic sell – the market will recover in the not-too-distant future. The medium to long-term prospects of property investment are always excellent, with little risk. The sellers' market has been with us for approximately eight years, and now that it has swung to a buyers' market, buyers should not miss the boat."
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