Inexorably linked to the prevailing economic climate, political rhetoric and property trends of the day, the real estate market’s response during a downturn is largely predictable, with tighter budgets, cash-strapped consumers and fewer property sales setting the tone for a decidedly buyer’s market.
However, there are always exceptions, nodes that resiliently continue to march to their own beat, like the Winelands, where cash deals are still prevalent and the top end of the market is still buoyant, says Chris Cilliers, CEO and Principal for Lew Geffen Sotheby’s International Realty in the Winelands.
Cilliers says most of their recent sales across all market sectors were cash deals, with the most sought-after properties being Paarl estate homes, premium new builds in Somerset West and houses in the more exclusive Stellenbosch suburbs.
“Cash is undeniably king in all markets, but this is especially true in a buyer’s market where a cheeky cash offer can be very tempting to a motivated seller,” she says.
“Savvy investors appreciate the value to be found in the current economic climate and recognise that now is the best time to buy low, rent out and wait for the market to climb again, especially in areas like the Winelands which offers the trifecta holy grail of lifestyle, convenience and solid investment returns.”
Cilliers explains why the upper end of the market in the most sought-after regions remains active whilst this sector generally bears the brunt of a downturn in most markets.
“There is often more price flexibility in this sector and, relatively speaking, you may achieve a larger percentage reduction in a higher priced property where the seller may be financially more established and have more options than sellers in the more affordable market segments,” says Cilliers.
“In the entry and middle markets, a home is often the seller’s biggest or only asset, and even a slight drop in the asking price can have a significant effect. But at the upper-end, sellers often have a range of assets and access to other financial opportunities which could influence their attitude to lowering the selling price.”
She adds that there is also a smaller buyer pool at this level, which translates to less competition, which is very advantageous in a buyer’s market.
Although the Winelands market has remained encouragingly active, it’s by no means immune to the current economic and political climate and realistic pricing is critical in all sectors.
This is not a market for ‘let’s see what happens’, and if sellers are not ready to meet the market they should rather hang on to their properties until the market conditions improve, says Cilliers.
“However, when a person is selling and buying in the same market, it’s important to remember what you lose on the swings you gain on the roundabout, particularly if you are buying up. You may well get a better deal when you buy, but you also have to be prepared to be negotiable when you sell.”
Cash may be king, but not everyone has the available resources to make a cash deal. Fortunately this is not necessarily a stumbling block, says Cilliers.
The banks are very hungry for business at the moment and there are some great deals out there for well-qualified clients, so if you are a strong buyer with a good credit record, and you can secure a property under the market value, many banks will be happy to give 100% bonds, she says.
Some will even help finance costs, so those looking to enter the property market for the first time will find that banks are currently very accommodating.
“The ‘wait-and-see’ investor sentiment has intensified this year due to the upcoming elections, and although we will start to see changes after May, it won’t be overnight and, in all likelihood, South Africa will again confuse the pundits and life will go on - and millions of South Africans will still need homes throughout the country,” says Cilliers.
“And those who took advantage of this window of opportunity are very likely to be smiling all the way to the bank.”
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