Sellers want more for their properties while buyers still want to pay recession prices. This is always the scenario when a real estate market starts to turn upwards.
There is no point in delaying the sale of an existing property in the hope of getting a higher price to assist your upgrade, rather buy soon.
Lew Geffen, chairman of Sotheby’s International Realty in SA, says this should not discourage those with plans to upgrade to bigger or better located properties from doing so as soon as possible.Geffen says there are several very good reasons for doing so, particularly in the current SA market, the first being that it is probably going to take some time for home prices to start showing any significant upward movement.
Although there are many more buyers in the market now than there have been for the past few years, it is not quite a sellers’ market yet, he says, and banks are keeping a tight rein on things by valuing properties very conservatively for home loan purposes.
“There is therefore no point in delaying the sale of an existing property in the hope of getting a higher price to assist your upgrade,” he says.
Geffen says another reason to make an upgrade move now, is that interest rates could very well move off the current historic lows within the next 12 months, and homeowners who want to upgrade might then find it more difficult to qualify for a new bond in addition to having to budget for bigger than expected monthly repayments.
Thus their new home could end up costing much more than necessary in the long term, he cautions. "For instance, the monthly repayment on a R2 million home bought now with a R1.8 million bond at the 8.5% prime rate would be about R15 600, putting the total cost over 20 years at some R3.749 million. But an interest rate increase of just one percentage point would push up the monthly bond repayment on the same bond to R16 800, and the total cost over 20 years to R4. 027 million.””
Geffen says experts predict that the credit amnesty which government intends to introduce before the end of the year is likely to make it more difficult to get a home loan.
He says the banks are opposed to the amnesty, which will see millions of credit records expunged from the credit bureaux, because it will make it extremely difficult for them to tell the difference between high risk and low risk borrowers. "Thus they are going to become extremely cautious about lending once more, and may well pass their additional risk on to consumers in the form of bigger deposit requirements and higher interest rates."
There really is no time like the present for anyone planning a home upgrade, he says.
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