It’s not surprising that many prospective property buyers are reluctant to dive into a long-term investment.
According to Schalk van der Merwe, franchisee at the Rawson Properties Helderberg Group, this uncertainty has played a major role in dampening the South African property market. Ironically, he says the very nature of property - and the driving forces behind it - make it one of the safest investments a person can undertake at times like these.
“Property addresses one the most essential human needs: shelter,” he explains. “No matter what’s happening in the world, humans will always need a place to live. As long as that’s the case, property will remain a solid investment and a lucrative asset, particularly when it’s purchased thoughtfully, maintained properly and periodically updated.”
With prices stagnating, and even decreasing in certain areas, Van der Merwe says the time is ripe for savvy investors to make the most of the situation. Here are his tips for leveraging current market conditions to walk away with an investment that will deliver great value for years to come:
1. Don’t skip the prep work
As in most things, preparation is the key to a successful purchase. Van der Merwe urges buyers not only to get prequalified for a bond, but also work out exactly how much cash they need available to cover deposits, transfer fees and other purchase costs.
Work out bond and transfer costs here.
“Knowing exactly where you stand financially is vital when it comes to negotiations,” he says.
Work out how much you can afford here.
2. Work with an agent
While it’s not traditional in South Africa for buyers to align themselves with a particular agent, Van der Merwe says having a professional on your side can be a very powerful secret weapon.
“A good agent is not only equipped with neighbourhood trends, they also understand the hyperlocal activity within suburbs and the subtle nuances that turn a good investment into a great one.”
3. Don’t assume listing prices are market related
According to Van der Merwe, property prices are frequently determined not by the agent, but by the expectations of the seller. This can see properties listing dramatically higher than their true market value - often because a seller is trying to recoup the cost of renovations or is simply out of touch with neighbourhood trends.
“Don’t be afraid to ask questions about how the property was valued. If the seller’s agent can’t provide well-supported reasoning - preferably through a comparative market analysis - it’s worth doing your own research into what a fair value would be,” he says.
“The last thing you want to do is put a ‘cheeky’ offer of R1.6 million on a R1.75 million listing only to discover the property was overpriced to begin with and you’ve still overpaid. In situations like these, the advice of your own real estate agent can be invaluable.”
Check sold prices in your area of interest here.
4. Use timing to your benefit
Van der Merwe’s final tip for buyers is to ask how long a property has been on the market before putting in an offer to purchase. The newer the listing, the less flexible the sellers are likely to be on price.
“If a home has been on the market for longer than average - that’s 16.86 weeks in Cape Town at the moment - the seller may be open to a lower offer,” he says. “This does vary depending on the launch price, but an experienced agent will be able to advise you on realistic limits. That doesn’t mean you should wait 16 weeks before putting in an offer - just keep the information in mind when opening negotiations.”
Despite the slow improvement on local economic recovery, Van der Merwe says the current property market is filled with opportunities for buyers.
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