There is often considerable friction between an outgoing tenant and their landlord (or more specifically, the estate agent acting for the landlord). The friction usually arises around issues relating to the deposit refund, and the liability the tenant has to address issues that need attention at the property.
First off, an inspection of the property with the tenant and the agent is required when the tenant first moves in. Any existing property damage is noted on the inspection, which is signed off by both parties. This protects the tenant from inheriting existing problems. If such a list does not exist, the tenant will need to prove that the problems existed prior to his lease – and the onus will rest on him.
During the lease period, as soon as any problems on the property arise that are related to fair wear and tear, or that result from storm damage, it’s imperative to report these to the landlord or rental agency immediately. Ensure you have proof that you did so by way of an email, not just a telephone conversation.
There should be mid-term rental inspections carried out during the period of the lease. Check with your rental agent when these are due and make sure you are present. The landlord or their agent will point out any damage that you are liable for. Take note of this and ensure you address the issues in good time.
Prior to your lease expiring an inspection will also be conducted with your landlord or the agent. You will be informed of issues you need to attend to, which could include the garden and the swimming pool if there is one. If you are liable for any damage then ensure you rectify the necessary before you move out and document what you do.
Once you have vacated the property a final inspection will be done. If you have already addressed all the problems previously brought to your attention then this inspection should be a formality and your deposit will be refunded to you promptly. Be sure to take a reading of the electricity and water meter, and settle any outstanding municipal debt.
As a general rule, if you have a dispute with the landlord then you need to address it at the time it is raised. Don’t ignore it thinking that the problem will go away – or that it will resolve itself. The fact is that as the tenant you are responsible for returning the property in the same or better condition that you received it – with the exception of “fair wear and tear” – being the usual maintenance issues that the landlord is liable for.
Both the tenant and the landlord have obligations in terms of the lease. Where both parties honor these obligations there is very little potential for problems. When making repairs to damage you have caused, have them properly done or else you will need to redo them, and document everything. This reduces potential disagreements.
It’s important to remember that when selling your property you are selling in competition, not in isolation. That means that buyers are also looking at other competing listings and will make a decision based on a number of factors. You will need to out-perform your competition of you want the best offers from the buyers.
Buyers are experts in property value. So there is no way you can try to fool a buyer into believing your property is good value if it isn’t. At the end of the day, it’s not the seller or the agent that places the market value on a property – it’s the buyers.
So what are the aspects that buyers consider when determining whether or not your property offers good value? Buyers will consider aspects such as location, size, views, condition, presentation, and price. A combination of these factors will determine the value that it has to any given buyer.
There are certain of these factors that you, as the seller, can alter, and others that you can. The location is pretty much “cast in stone”. The views will be pretty much unchangeable unless there are some trees that can be pruned to open up an existing view.
The size could be altered – but in most cases, a seller wouldn’t go to this expense unless a proper feasibility was done to confirm the return exceeds the cost but an acceptable profit margin.
The aspects that are in full control of a seller are the condition, the presentation, and the price. The condition is a significant factor that will impact a buyers’ perception of value. For example, if there is damp, paintwork, leaking taps and gutters, cracked tiles or worn carpets – the buyers will discount the value based on the costs they will need to incur to rectify these areas.
In many cases, the reduction in value in the eyes of the buyer far exceeds the actual costs of rectification. So it would make sense for a seller to address these issues properly and so enhance the value of their listing.
There is also much to be said for the way a house is presented. The presentation has a huge impact on the emotional impact a property will have on buyers. If the presentation appeals to the right emotions then a buyer “falls in love” with the listing – and that’s when they will see the additional value and make a strong offer.
Much can be done by a seller to ensure the presentation is perfect – from the cleanliness of the property to the state of the garden and pool, to the lighting, sounds, and smells that create a wow.
Finally, the pricing is completely in the control of the seller. Listen to the feedback form the market. If the price is too high then make the adjustment. When you’ve taken care of all the factors you can influence and price correctly then you sell for the most the market will pay.
Making the decision to purchase a property is not easy at the best of times. Usually your property is one of your most significant investments. There are many factors to consider.
It’s even more difficult to make a decision when there is market uncertainty, as we are experiencing now. The political and economic situation raises questions as to what the future holds and many purchasers are wondering if now is the time to commit to a purchase.
There is no crystal ball, but here’s our take on what to consider when making the decision:
First, consider your financial situation. Above all else, can you afford to make the purchase? Even though there is talk of interest rates potentially dropping, the smart move is to ensure you can cope with your installments even if the rates went up by 2%. Give yourself the comfort of knowing you can cope with the worst.
Next, consider the reason for your purchase. There are certain conditions under which you would need to proceed, irrespective of the market. These include the need to scale down due to debt, the fact that you need a larger home for a growing family, or that a property meets your physical requirements i.e. single level for practical reasons.
Then you need to consider whether or not it is a sound investment. What we’ve seen in the past 3 months is that sellers are much more realistic with their pricing. Those that want to sell have listened to the market and made price adjustments. There are many listings that now represent good value, especially in developments. That means you can purchase with the knowledge that you aren’t overpaying.
Do you wait and see if pricing drops and there is better value later? That’s always a gamble. Whilst prices have steadied, there is no indication that they will drop. Strong demand results in stable values. If there is, for some reason, a significant drop in property values (highly unlikely) then you can also be certain there will be a significant change in the lending policies of the banks – meaning finance will be much tougher to get.
On the face of it what we are experiencing is a market correction. The correction is in the sense that the upward pressure on pricing has tapered off, not that property values have dropped. That means that when you make an offer a serious seller will look at the facts and consider a “fair market value” offer. And that’s great news for purchasers looking to make a sound investment.
Also important to consider is that many investors with cash are turning to property as the safest investment to make. Over 50% of our sales this year at Harcourts Platinum have been 100% cash. That’s a really good indication to purchasers that property still remains the most sensible investment vehicle locally.
The smart money is to buy now, as long as you can afford to.
One of the big considerations for a property seller is that of which agent to select, and what the selling fees will be. Sellers are able to choose from a host of different agents and different fee structures. Just how do you choose the one that costs you less?
As with everything in life, not all estate agents or offerings are created equal. So it’s extremely important to do your research before committing to an agency.
The critical question is this: which estate agency will put more money in your pocket once your property is sold and transferred?
Notice that the question isn’t who has the lowest fee. It’s who put’s more money in your pocket. In order to do that, an estate agency needs to demonstrate how they will achieve you a better price that justifies their fee. Once you have deducted the agency costs then you need to be left with more money than if you had selected another agent.
There is a reason why people don’t buy the cheapest product if they can help it. In almost all cases, a cheap product represents bad value as it doesn’t last as long or doesn’t offer the same benefits and features as a better quality product.
It would be foolish to conclude that the agency with the lowest percentage commission will offer you the best value. So don’t fall into that trap!
The strategy of selling for the most money, in simple terms, is as follows: Engage the agency with the best marketing plan to attract the best and the most buyers in the marketplace to your property. A skilled agency then places these buyers in a position where they need to compete for your property. Under the condition of “competition” a buyer will make their highest offer. Period.
It comes down to the ability of the agency to market your home, attract the best buyer enquiry, and use their skills to get the buyers to compete and make their very best offer. Unfortunately that costs the agency money. It’s for that very reason the agency whom achieves you the highest price in the market won’t have the lowest commission rate.
But what they will be able to demonstrate to you is the strength of their comprehensive marketing plan, and their ability to get the buyers to compete to make you their best offer. An agency that has this ability will achieve you the highest price the market will pay.
An agency with a low percentage fee, weak marketing, and that lacks the ability to create buyer competition will not get you full market value. They may have a lower fee, but you put less money in your pocket.
This is even more true in a tighter market, such as the one we’re currently in. So select your agent wisely, not on their percentage fee, but their ability to give you more money in your pocket after the fees are paid.
It was “4 in a row” for Harcourts Platinum, local real estate agency in the Helderberg, when they were crowned #1 office for Harcourts South Africa at their national conference in Swaziland last month.
Principal, Steve Caradoc-Davies, was full of praise for his team as they walked away with the top accolades, including Top Office for Units Sold and Sales Value.
“It’s such an honour for our team to be recognized in this manner. We’d like to sincerely thank our valued customers in the area who continue to support us and allow us the privilege of assisting them with their real estate needs. There is no greater honour”, said Caradoc-Davies.
In addition to the sales awards Harcourts Platinum was also awarded the Marketing Excellence and Online Excellence awards. They are pioneering the use of Virtual and Augmented Reality marketing in South Africa and enhancing the buyer experience, and delivering world-class marketing strategies for their sellers.
There was also recognition for their top performing agents. Ansie Naude-Erasmus achieved 13th position nationally, while Harcourts Platinum took 4 of the Top 5 agent spots – Michael Pashley was placed 5th, Hornette Botha 4th, Alistair Ormerod 3rd, and Jason Hutton 2nd. These are significant achievements given there are over 1200 agents in Harcourts South Africa.
Steve Caradoc-Davies has just returned from the Harcourts International Conference on the Gold Coast in Australia where they were again honored, this time at international level. Harcourts operates in the USA, China, Australia, New Zealand, Canada, Dubai, Fiji and Indonesia. Jason Hutton placed 16th in the world, from over 6600 agents – a phenomenal achievement!
For the first time in the history of Harcourts South Africa an office placed in the Top 10 from over 890 offices – with Harcourts Platinum achieving an astounding 9th position in the world.
“Our international achievement would not have been possible without our dedicated team who strive to deliver a world-class experience to our clients. We can be immensely proud of their achievement on the world stage and again thank all our past and present customers for their ongoing support”, said Caradoc-Davies.
It’s a cause for concern when you are listed on the market and your property hasn’t sold yet. If properly managed though, there is no need to panic. It’s important to realize that you will need to evaluate the situation and make some decisions if you want a result.
Research shows that the quicker a property sells, the more it sells for. That’s because the initial market period – being the first 2-8 weeks – is where most of the buyer activity happens. Many sellers are tempted to price their property high initially, sometimes on the back of an overvaluation by estate agents keen to “buy” your mandate.
By the time you adjust your price to be in line with the market value you may well have lost the benefit of the initial marketing period where there is most buyer activity and competition. So don’t let that happen.
Your agent should be giving you regular feedback on the level of interest, enquiries, and buyer comments. If not, ask for the feedback or change to an agent that does communicate honestly with you.
If you have very few enquiries then that means one of two things: either your marketing is too weak, or your property is overpriced and buyers are not even bothering to contact the agent to view. Competing properties will appear to offer better value. Without the feet through the door you just wont sell.
You will want to ensure your property is properly marketed online, in print, and on show. If not, change to an agent that will execute a powerful strategic marketing plan. If your marketing is in place and you still aren’t getting good enquiry, then you can safely conclude your price is too high.
What if you are getting viewings, but no offers? In most cases this means your property marketing is strong, but when buyers view your home they don’t see the value in comparison with other competing properties. Again, this means you may need to reduce your price to present better value.
If your property is very unusual and will appeal to a small buyer pool, then you may need to allow additional time to find a suitable buyer. However, for the majority of residential listings, it’s vital to price correctly, marketing strongly, and attract the buyers during the initial marketing period.
Ask your agent for the buyer feedback. A skilled agent will know how to extract an honest opinion from a buyer. Listen to the buyers without taking it personally. There may well be some things you can do to overcome objections – such as maintenance or they way your property presents. If buyers indicate your property is overpriced then react quickly and make the adjustment.
As the market changes buyers will get more selective over the properties they wish to purchase. They will want the best value, and increasing stock levels mean they now also have more to choose from. Make sure you’re the best listing in your price range and you’re certain to sell.
There will always be investors, irrespective of the market and the economy. The difference when the economy is unsettled, and the market uncertain, is that investors are more selective about where they invest.
For the foreseeable future, the Rand will continue to be unstable and will react to any political or economic changes. There may well be a follow-on impact on interest rates, but the powers-that-be will do all they can to limit increases given the significant pressure on keeping inflation at acceptable levels and stimulating the economy.
In uncertain times investors often turn to property. It’s much less volatile than most other investments. In addition to this, investors can often borrow from their bank to finance their property investment.
So let’s consider residential real estate as an investment option. Residential rental demand is exceptionally strong – but not in all price ranges. Highest rental demand is below R15,000 / month. However, you wouldn’t want to play in the rental space below R6,000 / month as arrears rental rates are higher in this range.
With rental values increasing it’s not uncommon to achieve a gross rental yield of between 10-12% per annum. So when you do the reverse calculation that means you would be looking to purchase an investment property between R720,000 and R1,800,000. It doesn’t mean that options above this range aren’t worth looking at – but this the hot range with the lowest risk.
There are some other considerations. You will want to purchase in a suburb and property type where there is steady capital growth. For example, a property in a gated estate will escalate at a higher rate than one in the suburbs.
When it comes to sectional title units such as townhouses, apartments, and flats you may want to look at units on the ground floor which would appeal to small families or retired tenants – or in a block where there is a lift.
Access to information on the historical growth in a suburb is easily available. Ask the agent you are working with or give us a call and we can supply you with the information at no charge. Historical data is important to identify trends, so don’t ignore them.
A further consideration when investing is the time value of money. For example, it’s a smart move to purchase a property off-plan at current market values that will still be built and for which you will only pay in the future. Often a development is launched where you only pay in a years’ time or more. By the time you pay for your investment you have already enjoyed significant capital growth.
When you shop wisely you will find intelligent investment opportunities in residential property. Property remains one of the safest investment vehicles. Do your homework thoroughly to ensure you select an investment that will give you a great rental return as well as strong capital growth.
When offering to purchase a property and when recording the sales agreement of a property it must be done in writing to be valid in South African law. There is a good reason for this.
There is much more to an offer than just the price that is offered. There are material terms to a contract that would well have a significant financial impact on the relevant parties. For example, which fixtures and fittings are included? What are the terms relating to the timing of the sale? When will occupation and possession be given, and when is the date of transfer?
There may also be agreement reached between the parties on obligations that each party has. In some instances an offer on a property may be conditional on the purchaser obtaining finance or selling another property. The payments terms are also agreed.
Sometimes there may be certain rectification work that a seller needs to carry out, including ensuring the electrical, plumbing, gas, and electric fence installation meets minimum government safety requirements.
If these terms are not recorded in writing then it becomes impossible to hold the parties to the agreement. Once a written offer is accepted by both parties it becomes a legal and binding agreement between all parties and they have an obligation, in law, to fulfill their obligations as recorded in writing.
For that reason it’s vitally important that you fully understand what you are signing, what your obligations are, and what the penalties are should you fail to do what is required of you. If you aren’t sure what a clause means then ask for a full explanation. If necessary, consult your attorney – but in most instances the agent will explain when you ask them.
The same applies when you sign a sole mandate with a real estate agency. In a sole mandate you commit to giving a real estate company exclusive rights to market and sell your property for a specific period of time. On what basis would you do this?
You should only consider this when you are happy with the marketing plan and service commitment of the agent – and these must be recorded on the sole mandate agreement. If their commitment is vague then you will find it difficult to hold them to it. So insist that the specific details are recorded on the mandate.
It’s also vitally important that the sole mandate include a clause that allows you to cancel the mandate agreement should the agency fail to fulfill their marketing and service undertaking and not rectify it when you notify them of their failure. If you don’t do this you could find yourself tied into a mandate with no performance criteria. Also be aware that you have rights under the Consumer Protection Act.
So, before you sign a legal contract be sure you understand what you are signing, and the full implications. When all parties fulfill their legal obligations this results in a successful and happy transaction – and that’s what you deserve.
If you were buying a 2nd hand car there would be a range of questions you’d be asking. You’d want to be 100% sure of exactly what you were getting so that you fully understand what value you are getting, and what your risks are.
The same applies when purchasing a property – with the exception that your risks are far greater given the significantly higher price ticket. As a purchaser you are counting on your seller and agent to disclose any defects or facts relating to the property you are offering on, as these have a direct bearing on the value you perceive it to have.
If you’re the seller, you want to achieve the highest price possible and you may have concerns that disclosing all defects will reduce the value of your property. So what do you do?
The seller has a legal duty to disclose any and all defects that a purchaser may not, on reasonable inspection, become aware of. There are the obvious ones such as a roof leak, structural faults that may be concealed or hard to pick up, and areas of damp.
A seller also has a duty to disclose whether or not the property has approved building plans for the structure as it currently stands. Perhaps there were renovations or improvements made, possibly even by a previous owner, which were not approved by the local council.
If you are aware of this then you have a legal duty to disclose this to your agent and potential purchaser. Unfortunately, for a dishonest seller, concealing information on known defects can be a costly matter. Your purchaser will have a legal claim against you should they be able to prove you withheld the information that you should have disclosed. Honesty is always the best policy.
In some countries it is customary for a property inspection to be carried out on a property prior to an offer being concluded. The inspector will list all faults on the property and then the purchaser enters into an agreement of sale knowing exactly what they are getting. This isn’t law yet in South Africa, but it will be coming one of these days. The proposed Property Practitioners Bill, if approved, will make it mandatory for such an inspection to be done for every property and attached as an annexure to every Deed of Sale.
That begs the question: how much disclosure is enough? Simply put, it’s always best to err on the side of caution. Be completely transparent and disclose everything you are aware of. If it’s of a serious nature, record in the Offer to Purchase that a matter has been disclosed, as it will relieve you of the obligation to rectify it.
If unsure then put yourself in the position of the purchaser and ask what you would like to know before making an offer. Be sure to disclose in full and in writing to your selling agent who has a legal duty to communicate any defects to a purchaser. Be safe, not sorry.
Whether you’re selling a luxury home on a golf estate, or an inexpensive apartment, is it still advisable to enter in to a sole mandate agreement and, if so, would the terms of the mandate differ?
In answering this question, let’s first determine whether or not a sole mandate is required for properties listed in different market segments. The purpose of a sole mandate is to instruct a single estate agency to invest their time and resources in marketing a listing in order to attract strong buyer interest and sell a property at the highest possible price.
This is true irrespective of which market segment you are selling in. The alternative to a sole mandate would be a joint mandate or an open mandate – and in both these instances you are asking agents to sell your property at any price, not at the best price. The reason for this is that, on an open or joint mandate, the agent will do their best to get a seller to accept their offer - not because there isn’t a better offer out there, but because the agent won’t get paid if their offer isn’t accepted. That sadly is the reality.
A sole mandate given to a reputable company that delivers on a written marketing plan and that employs strategies to create buyer competition so that the seller sells for the maximum is without a doubt the best option – in all market segments.
But would the terms of a mandate change for different market segments. Most certainly they would. It’s not a case of “one size fits all”. Generally the length of a sole mandate would be determined by the average selling time in that specific price range for that specific property type. In a market that moves slower or where a unique property attracts a very small buyer pool, a sole mandate would run for longer than for other listings.
The marketing strategy and strength of the marketing would also vary. It would make little sense for a real estate company to spend the same budget marketing a R 1 million property as they would a R 10 million property – although sadly this does occur when listing with the wrong agency. A skilled agency would tailor a marketing plan to attract the right buyers for the correct market segment. You’d hardly find a R 10 million buyer on Gumtree – but you may source the right buyers through powerful print, online, video and Virtual Reality marketing.
It’s important to remember that the kind of marketing that is used on your property will position it in the market. If not done correctly, your property won’t be correctly perceived. The result is that you won’t attract the right kind of buyers and you’ll sell for less than market value.
When selecting your agent, be sure to determine if they are proposing a solution appropriate for your property - one size does not fit all.
Imagine going shopping and having no idea how much cash you have in your wallet, or how much credit is available on your cards. Sound crazy? It’s much the same when you go shopping for a property without first getting yourself qualified for a home loan.
So often we hear purchasers tell us that they have spoken to their bank manager and “they’re good for the finance”.
Those days are long over. Your local branch manager has zero control over your home loan. Finance applications are handled by the credit departments of the various banks and sadly, your manager has no influence at all.
In a volatile economy the banks will often change their lending criteria. That means if you qualified for a certain home loan value last month it may not apply today. Anticipated interest rate increases, political and economic uncertainty, and changing markets mean that banks are more averse to risk.
Doesn’t it make sense to find out what a bank will finance up front? With over 50% of finance applications being declined, or approved but at a lower loan-to-value (LTV) rate (in other words you need a larger cash component), it would make sense to make a little effort now in order to ensure the success of your application later.
If you happen to be self-employed the process is even more onerous and requires you to be well prepared long before you start shopping for a property. Not only do you want to know the value of mortgage bond you qualify for, but also the percentage of the purchase price your bank will fund. Don’t assume you’ll get 100% finance. In most instances you will be required to put down a deposit of between 10-20%. In addition to this, you will need cash for transfer and bond registration costs.
With so many home loan applications being declined in the current market it’s now common for a Deed of Sale to include a clause that allows the seller to continue to market his property while waiting for your bond approval. If he receives another acceptable offer you will then be placed on short notice to obtain your finance or risk being cancelled out.
Finding the home of your dreams is a tough and emotionally challenging process. Why add to the stress by purchasing a property with little or no assurance you will qualify for the finance? With very little effort you could speak to a bond originator who will arrange for a pre-qualification.
Don’t forget to find out what loan-to-value (LTV) you are likely to obtain. Budget accordingly and ensure you have the cash on hand you will need for your deposit and costs.
When you’re armed with a pre-qualification your offer on a property will carry significantly more weight – and may even help your offer succeed over another unqualified buyer. So remove the risk of losing your dream home by knowing up front what finance you will obtain. Happy shopping.
Many property owners contemplating selling wonder when the best time is to list their property for sale. Do you wait for summer? Is it best during school holidays? Do you wait until the market improves?
These are good questions, and as with any investment, your return depends very much on your timing. So just when is the best time to list your property?
To a large extent, this will depend on what you intend to do once you’ve sold. For example, if you are intending to upgrade to a larger or more expensive property, then waiting for the market to improve means that you may well sell for more by waiting, but you will also have to pay more when you purchase. The corresponding increase in your purchase price will be more than the increase in your selling price – thus costing you more. In such an instance it may be better to sell now when the cost of upgrading is less.
The converse is true if you are downgrading to a property less expensive. Your gain by waiting is greater than the additional cost of purchasing a less expensive property later. We’re assuming property values do escalate.
Is it better to list in the summer months? Whilst it’s true that a home shows better when a garden is in bloom and the sun is shining, the impact of the weather is far less important than the state of the market. We’ve seen the market at its’ hottest in some winter months.
The best time to sell is when buyers are buying. The state of the market is dependent more on the economy than the weather. You will sell for maximum market value when buyers compete for your property. This means that you should sell in a market where there are more buyers than sellers.
There are a number of economic factors that impact the appetite buyers have for property. They include the interest rate and the inflation rate – which have a direct impact on buyer affordability. When these rates increase buyers qualify for less finance – and this has an immediate impact on what they can offer for property.
Additionally, the appetite the banks have for home finance has a significant impact. When banks are more cautious and avoid high loan-to-value (LTV) bonds (such as 100% bonds), then many buyers fall out of the market. Banks also price in their risk – so the higher the LTV the higher the interest rate, thus reducing the amount a buyer can afford.
The best time to sell is when the market is stable. If panic sets in and the market is flooded with listings due to economic pressure on homeowners, then property values drop.
There is growing uncertainty as to the impact of our newly acquired “junk status” and how this will affect interest rates and banks’ appetite for finance. The smart move is to sell before these effects are felt. Now is a great time to sell…
Much has happened in the last week in the world of South African politics. Even though some of the action was anticipated, it came as a shock to the South African economy. The Rand depreciated by 6% overnight, and at the time of writing this article, was continuing to weaken.
Overseas investors see South Africa as highly risky because of the political volatility and instability. Not only was the currency immediately impacted, but so was the stock market. Billions of Rands were “lost” in a matter of hours.
If you were such an investor, that’s not great news. Some economists expect things to get worse – a lot worse. Whilst we don’t have a crystal ball, what everyone will agree on is that most investments are extremely risky. And risk is not good.
While many sectors of the economy have taken a major hit in the last week, just what was the effect on the local property market? Nothing. Absolutely nothing. Nothing bad that is. We experienced our busiest week of the year. That’s no surprise really.
The reality is that, whilst the property market is impacted by economic factors, it is not nearly as volatile as other investments. It doesn’t lose 6% overnight. There are always risks, but even in a down-cycle the movement is steady, not sudden.
The reality is that the property market is considerably more stable than every other investment for one simple reason: supply and demand. Even in a tough economy, people need to live somewhere. Those who can’t afford to purchase have to rent. There are always investors who see the attraction of capital growth and rental income who take advantage of the demand.
So whilst many investors sadly suffered significant investment loss last week, those who invested in property would mostly have experience no loss at all. In fact, as more investors appreciate the attraction of property investment and snap up local property, there will be an increased demand. The stronger the demand is, the more property values escalate.
That means property values should continue to escalate in areas of high demand, such as the Western Cape and specifically the Cape Town Metro, including local property in the Helderberg area. The continued stream of up-country buyers into the area is also adding to the high levels of demand, and there is no sign of this letting up.
If you have the means to invest, now would be the right time to look for low-risk investment vehicles – and it’s hard to beat property. Not only is it stable, but in most cases will give you a rental income as well as good capital growth. When you gear your investment with a mortgage bond, you are able to maximize your net return on investment in a tax-efficient method.
So whilst the country is sorting out its political mess, invest intelligently in a market that will weather the storm and give you great returns without high risk.
When it comes to selling your property, just how important is print advertising? With all the new online marketing platforms available, is it really necessary to go to the expense of marketing in print as well?
It certainly is true that there are a number of alternative marketing mediums in the modern world. The Internet has provided many powerful platforms to market property and property portals can include video, multiple images, and walk-through virtual reality tours - as well as the ability to search for properties in a specific price range and geographic location.
Whilst some of the online marketing options are very costly, the basic property portal listing is relatively inexpensive when compared to print marketing. As a result most real estate companies commit the bulk of their budget to the online marketing mediums. But is that where all the buyers are sourced?
There is no doubt that a large section of buyers do search for property online. It’s convenient, easily accessible, and instant. However, it would be a mistake to conclude that buyers don’t also search for properties advertised in print. In our experience, the buyer who searches in print is often a very different buyer to the one searching online.
For example, when searching online a purchaser usually includes a specific location and price range. They may well miss a potential property that falls outside their initial search parameters. The purchaser who looks through print marketing may be drawn to a specific property that appeals to them that they would have missed in an online search. In many cases they end up purchasing in a location they hadn’t considered, or in a different price range.
It would be a mistake, though, to see the different marketing platforms in isolation. The strongest marketing strategies use all available marketing mediums in collaboration with each other. For example, when our properties are advertised in print we also include the web reference number. Almost without fail, when a property is marketed in print there is a corresponding increase in the online views of that listing - showing how offline marketing drives online marketing.
In addition to this new Augmented Reality marketing allows you to scan an image that appears in a print advertisement with your Smartphone, and have instant access to all the digital marketing related to that property as well, instantly.
It would be safe to conclude then, that the best marketing plan for your property is the one that uses all forms of advertising in a structured plan to attract the widest pool of qualified buyers. Every buyer enquiry is important, and the more competition there is the more you will sell for. When you are deciding which real estate company to list with, find out exactly what their marketing strategy is and how they will use all the marketing mediums available to find you the very best buyer.
In the industry we often hear the expression from estate agents “my buyer”. This may lead one to conclude that agents have ownership, or exclusive access to certain buyers. Is this really true and, if so, how should that impact on your decision of which agency you will list your property with?
Whilst some agents would like to believe that they have their own buyers, the reality is that buyers follow houses. Even if a buyer would prefer to work with a certain agent because they have built a relationship with them, if their preferred agent isn’t able to show them a listing that they really want to see, then the buyer will contact the listing agent directly.
It’s not that a buyer is disloyal – it’s simply a fact that buyers will contact the agent who can show them a listing they would consider purchasing. And that’s exactly how things should be.
At any point in time there is an existing pool of buyers in the market looking for a certain kind of property. These buyers do not belong to any agent or agency – they are independent and will hunt for the property that meets their needs. The only exception to this is where a buyer signs a written Buyer Mandate with a specific agency – but this is extremely rare and generally not in the interests of the buyer.
That being the fact, with whom should a seller list their property in order to access that existing pool of buyers? If the buyers don’t belong to a specific agent or agency, then how do you reach them?
Quite simply, the buyer pool is accessed by the estate agency that markets your property most effectively to that buyer pool. The better the marketing, the more buyers will see your property in a positive light and respond.
In order to do this an effective marketing plan would include marketing in a wide range of marketing mediums to attract a wider buyer pool. They would also ensure that your property is showcased at its’ absolute best – thus appealing to the emotions of buyers and ensuring that your property stands out in the crowd.
Without this marketing you simply won’t benefit from strong enquiry and will usually end up selling for less than market value. However, where a strong marketing plan is executed resulting in strong buyer interest – maximum buyer competition is achieved.
Where an estate agency markets effectively they generally don’t have to sit back and wait for other real estate companies to introduce buyers to their listings. The buyers contact the listing agent directly. That’s empowers the listing agent to negotiate directly with the buyer, maximizing the buyer competition, and getting the buyer to make their strongest offer.
When this happens the seller sells for the highest market value on the day. It’s what every seller deserves – and it’s entirely dependent on their agents’ ability to market to the widest pool of buyers.
Principal, Harcourts Platinum
One of the most difficult decisions for a seller to make is whether or not to accept the written offer that they have on your property. Naturally, if its’ a full price offer you’d be delighted and, provided the terms were fair, you’d sign and pop open the champagne!
But if the offer isn’t full price, then how do you determine whether or not to accept it?
There will be a number of factors to consider. Here are some you would want to take note of:
Don’t conclude that there will always be a better offer out there – even if it’s your first offer. If your property has been well marketed to create buyer competition, and your agent has worked the buyer up to their maximum, you probably have the best offer available today. And that’s the peace of mind you deserve.
Principal, Harcourts Platinum
For years real estate remained stuck in the world of the marketing “dark ages”. You could often find out more about a R500 camera than a R 2 million property.
No more. New technologies have created new ways to market property. Harcourts Platinum in Somerset West is one of the first agencies to embrace the technology and offer it to all their exclusive sellers.
Virtual Reality marketing allows you to virtually walk through property, either on your smart phone, tablet, or PC – or by using your smart phone with Virtual Reality goggles. You can be lying on the beach, or sitting in London, and navigate through a property as if you were standing in it.
Special cameras allow these tours to be created for existing properties. But what of a property not yet constructed? Harcourts Platinum has introduced the Virtual Reality features for many of their new developments – so you can now visualize a property that only exists on paper!
Augmented Reality is even more cutting edge. After downloading a free App from the Google Play or Apple Store (Harcourts Platinum AR), you can scan any photo from Harcourts with the AR logo. The image will “come to life” in video, with links to the Virtual Reality tours, the websites, and even other listings.
For developments the Augmented Reality App opens to door to all the development information, virtual reality tours, Interactive Site Development Plans, and the like. This technology links print marketing with digital marketing – giving you the best of both worlds.
For buyers this means you enjoy an interactive viewing experience and can make a shortlist of the properties you really want to view – even experiencing off-plan properties coming to life. For sellers, you can reduce the number of unqualified buyers through your property, and ensure your property stands out in the crowd – thus increasing buyer competition and selling for more.
It changes the way you view property - and it’s available right here through Harcourts Platinum.
For more information phone Janine on 021-8512614, watch the video at http://platinum.harcourts.co.za/Home/virtual-reality, or see the Harcourts print advert in this issue.
Principal, Harcourts Platinum
If you’re a serious property investor you will be interested in 2 things: Capital Growth and Rental Return. Both are equally important. Your rental return will determine what shortfall you will need to cover each month (or what monthly income you will generate). Your capital growth is where your equity sits – and you’ll want to see this value grow steadily over time.
The key with property as an investment is that it’s a medium-to-long term investment. It’s not common to purchase a property and experience sufficient growth to cover the costs of acquiring and selling the property in a few years.
But there are some clever ways to speed up the process. This is particularly true when it comes to purchasing in a new development when it’s being sold off-plan. Here’s why.
Very often a developer will “sweeten” the pricing of the release phase of a new development. This is because of the need to achieve a certain number of sales for their funding to kick in, or to demonstrate the market appetite for the product. If you get in early you benefit from the launch pricing.
Secondly, you benefit from the additional time that lapses between your signature on the contract, and the delivery of the property. There can often be a delay on many months, even years, while the developer gets the services installed before he can give transfer of a plot. Where a turnkey property has been bought, the developer still needs to construct the dwelling before you pay and take ownership.
In many cases we’ve seen the growth in the value of a development property increase by 25-30% by the time the purchaser actually pays for it. That’s growth before you’ve acquired and paid.
What are your risks? The developer may decide not to proceed with the development in some cases (if the contract allows for this). The sale would be cancelled and you’d have your deposit refunded as this would have been held in trust.
There is always the risk that the market turns, as it did in 2007-2009. When that happens it’s always best to hold on to your investment as it’s only when you actually sell the property below your cost that you lose. In most cases where you hold on to it the market recovers and you’re in a positive situation. The same is true of any property investment, not just a development property.
Also pay attention to the infrastructure around a new development. What shopping centers or new schools are planned? Will the roads be upgraded? Where you see significant investment in the infrastructure you often see higher appreciation in property values.
Once you’ve identified the smart opportunities be sure to get in early before the prices increase. Benefit from the initial capital growth resulting from keen pricing and the longer time it takes for delivery. Let your new investment work for you even before you’ve paid for it. Now that’s smart investing!
Principal, Harcourts Platinum
In most instances our property represents one of our biggest assets, if not our largest. Many property owners have a debt registered against their property in the form of a mortgage bond, to which they are contributing monthly. Our property is an investment and we are hoping that at some later point in time when we sell it, we will enjoy a good return on our investment.
Why not rely on an older appraisal value? For one thing, our property value changes frequently. Our property is worth what a willing and able buyer will pay for it today. In order to determine the value we would consider what similar properties have recently sold (these being the facts), and what similar properties are currently on the market for sale (these being the competition).
We would also look at the general market activity and buyer demand for similar properties in the local market. Once we have taken all these factors into consideration the market research will show what the current market value is. Whilst it’s not an exact science, if correctly done using current sales on genuinely comparable properties the result is accurate to within a few percentage points.
It’s important to remember that only a qualified Valuer may actually “value” your property – but that an estate agent that is not a Valuer may “appraise” your property. Be sure to speak to an experienced agent to ensure accuracy.
When there is strong market activity, such as we are experiencing now, we see that property values change at a faster rate. A recent sale of a comparable home at a record price means your property value has just changed. So why know the value?
It’s important to do an annual assessment of your assets and liabilities for wealth planning. Just what is your net asset value? How does this relate to your retirement planning and future income stream?
If you had a few million Rands invested on the stock market, how often would you check on their value? Every few years – or every 6 months? We are speaking about your single largest asset here…
When analyzing your assets and liabilities (together with your income and expenses) you may find that you have capacity to purchase an investment property. Rental returns are higher than I can remember for the 27 years I’ve been in the local real estate market – with all forecasts that returns will continue to increase. That means that, in many cases, within a few years your rental income will cover your bond installment giving you a positive cash flow.
If you pay the excess into your bond you could repay it much faster than the standard 20-25 years. That means you will have another asset generating a monthly income that can feature in your wealth planning. Consider also the future capital value when you sell it.
So why not speak to an experienced agent today about your current property value? An appraisal is usually done at no charge – and it gives you critical information you need now.
Principal, Harcourts Platinum
When there is strong demand for a property it’s not unusual for buyers to have to compete against other buyers for a property. In such a case, just what can you do to strengthen your offer? And what important factors do you need to bear in mind?
Let’s start with the concept of multiple offers. It’s the estate agents job to market a property and attract as much interest from qualified buyers as possible. If a property is correctly priced and the marketing is strong, then buyers will respond and indicate their desire to make a written offer.
The estate agent needs to act in a professional and transparent way so to all interested parties. A “horse-trading” scenario will need to be avoided – and all offers would need to be handled in a confidential manner. It’s not uncommon for the agent, with the consent of the seller, to put the property into a “For Sale By Tender” situation.
In a case like this, all interested buyers are asked to make offers by a certain date, and to leave the offers open for a specified time – perhaps 2 or 3 days. The seller then looks at all the offers and accepts the best one. Alternatively, the estate agent would just disclose that there are other competing offers and then the buyers make their best offer.
As a buyer, always ask if there are other competing written offers. When competing you will only have one chance to make your very best offer – so don’t waste that chance!
When making your best offer there are 3 aspects to consider: The price you offer, the terms of the offer, and the timing of the offer. All 3 aspects will have value to the seller. Naturally, the price you offer is important – so once you have worked out what you can afford, taking into account the finance you qualify for and cash you have, then offer your maximum.
Next, look at the terms of your offer. Can you pay a large deposit? What is the lowest loan-to-value bond you could take? An offer subject to a 70% bond is much stronger than an offer subject to a 100% bond. Can you remove any special conditions? Can you pay a higher occupational rental? All of these factors have a bearing on the strength of your offer.
Lastly, consider the timing. Ask the agent what the sellers’ preference is on when they want to move out and give transfer. Where possible, try to fit in with the sellers timing. This will significantly strengthen your chances of success.
When competing for a property you may not get a chance to negotiate a counter-offer with a seller. So submit your absolute best offer and give the seller a day or 2 to consider it. Paying slightly over what you had intended will seem less relevant later when you consider the years of enjoyment in your dream home.
Principal, Harcourts Platinum
It’s what every seller wants, and deserves: selling for the highest possible price. After all, your property is a significant asset, and you’re entitled to maximize its’ value. Just how do you ensure you sell for the most?
Simply put, the answer is to create massive buyer competition. That’s the only condition under which a buyer will pay their maximum – when they are competing against someone else for your property. That begs the question: how do you create massive buyer competition?
This is where you need to skills of a professional real estate company with marketing strategies that work. It’s the main difference between the result you get selling privately and selling with a company that is a marketing expert. A word of caution: not every real estate company knows how to do this. So be sure to select wisely.
Here’s what we know about creating massive buyer competition:
It’s obvious that a strategic marketing plan incorporating the above strategies won’t be provided by the agent with the lowest selling fee. It’s simply not possible. So don’t select the agent with the lowest fee – select the agent with the strongest marketing plan to attract the best buyers and create that buyer competition – thus getting you the highest price.
By way of example, we marketed a listing in Somerset West last week that was very well priced. The marketing campaign attracted buyers from all sources – online, print, off the board, and the database. We received over 100 buyer enquires in 5 days, and conducted over 60 viewings – most of them in groups with 20 buyers viewing at the same time. Buyers felt the pressure to compete.
We received 9 offers within 3 days with 4 offers above the list price. The strategies employed resulted in the property selling for more than 12% above list price. It’s a perfect example of creating buyer competition to sell for maximum market value. Why settle for anything less?
Principal, Harcourts Platinum
In a world filled with uncertainty the local property market has kicked off to a strong start in 2017. Whilst there is no denying we have our own challenges in South Africa and we’ll be watching the impact that politics has on our local economy this month, for once it seems there are greater problems in other parts of the world.
It would appear that the stream of buyers from Gauteng and KZN continues as many try to relocate to the Western Cape. There has been a slight change in the ability of these buyers to purchase though, with many finding it difficult to sell their properties, especially in Gauteng where it appears to be a buyer's market – with more listings than buyers.
Last year saw strong property growth in the greater Cape Town area, with average figures indicating that property values escalated by approximately 15%. Demand for local property continues to put upwards pressure on pricing – but this is expected to slow down in the short term as economic factors put the breaks on.
Local banks are very aware of the potential economic pressures looming and are conservative when approving buyers for home finance. This should temper the rate of property growth in 2017 – but we can still expect property to perform well.
January saw good sales volumes in many of our developments – with buyer demand for security estates higher than it’s ever been. Many of our developers have created product that offers exceptional value and caters for buyers looking between R 2 to R 3 million – the hottest price range locally at the moment.
With rental demand also continuing to grow the buy-to-let market is also very strong, and investors see property as a safe bet that provides not only a monthly rental return, but also steady capital growth. When combining the two factors, net annual returns in excess of 20% certainly compare well to other investments.
When you add to this the fact that you can gear this with bank finance, and that the property market is much less volatile than most other investment vehicles, we expect that investors will continue to look to property in 2017.
Also great news is that the Rand has performed well over the past 2 months and interest rates were not increased last month. These factors will hopefully keep inflation rates at acceptable levels with will assist with buyer affordability.
Generally speaking it would have been difficult to paint a much more positive picture for the start of 2017. The optimistic approach is that the political climate remains calm over the next few months and everyone can focus on getting the economy back on track.
That being said, irrespective what happens politically and economically, the Western Cape and particularly Cape Town, is a great place to live. Now if the Springboks could just perform as well as the Blitzbokke and the Proteas we could just have the perfect year!
Principal, Harcourts Platinum
As a seller, it’s only natural that you would want to save where you can on your selling costs. One of those significant costs is the estate agents commission. If two estate agencies were offering the exact same marketing, service, and results, and one was considerably cheaper than the other one, then it would make perfect sense to go with the cheaper option.
But that’s where the problem comes in. In most cases, you would find yourself comparing apples with oranges.
For example, there are “low-commission” estate agencies, who offer only some services like online marketing – but don’t do the buyer viewings or negotiation.
Then there are the “full-service” real estate agencies, but who offer what appears to be a much lower than normal commission rate. In all cases, it’s important to understand exactly what you are getting for your money. Don’t be fooled into thinking that all real estate agencies, services, and results are equal.
As with everything in life – you get what you pay for. So do your homework thoroughly. Here are some pointers on what to research and the questions you should be asking:
– What is the commission rate, and are there any fixed costs that you will incur even if there is no sale? In some cases, you may have to pay for marketing up front irrespective of whether or not the property sells. So what are the costs, and when do you have to pay them?
– What kind of marketing will you get? If you are offered only Internet or website marketing then be aware that you are not getting a full marketing plan. It’s true that many buyers shop online, but certainly not all of them. What of print marketing? Showhouses? Database marketing? And is the marketing going to make your property stand out in the crowd? A weak marketing plan means weak buyer inquiry and low offers.
– What service will you get? Who is going to do the buyer viewings? Who will qualify the buyer for finance? Who will do the negotiation? Negotiation is absolutely critical in getting the best price. An experienced agent knows how to create buyer competition – which is the only condition under which a buyer will pay their maximum. Without it, you will get low offers. Period.
– What is the agency track record? What is their market share? What is their “average days” on the market? What is their average drop between listing and selling price? Simply put, can they show you factual proof that they are able to get you the best result? Talk is cheap – ask for the facts.
A low commission rate does not guarantee you the highest net price. Usually, it gets you the opposite. Without powerful marketing and experienced selling skills and strategies you almost certainly won’t get the highest price the market will pay. Be sure to research thoroughly. Often what appears to be the cheapest is the most expensive.
Principal, Harcourts Platinum
It’s a big decision to sell your property. So just when is the best time to list your home? Is summer better than winter? Is it best to wait until the holidays are over? Do you wait for economic indicators to improve?
There are many issues to consider, but here are some pointers on what to look at.
Firstly, consider your timing. By when do you need to move? You should allow 2-4 months to sell and a further 2-3 months for transfer. Sure – You may sell in the first week, but it’s best to allow for a few months. So give yourself a clear 4-6 months between when you list and when you need to move.
If your timing is flexible, the next issue to consider is when buyer interest will be at its strongest. Historically this use to be in the warmer summer months. However, in recent times the economic climate has been far more important than the actual weather. You should be looking for the stable market without any hint of panic.
Consider the current local market for example: Buyer demand is still strong but economic pressures are starting to impact the affordability of buyers. In other parts of the buyers. In other parts of the country markets are flat or even dropping off. Because demand for property locally is still very strong, we’ve enjoyed good growth in property values.
That said, there are no guarantees this won’t change. The only thing certain about the world we live in today is that it’s unpredictable. Just look at so9me of the significant political surprises in both the UK and the USA. When you consider how fragile our own local political and economic environments are, you’d have to agree that just about anything can happen at any time.
The Rand weakened by almost 10% against the major currencies in just two days last week. If that trend continues it may well lead to interest rates increasing. Add to that a possible downgrade to ‘Junk Status’ – And it would be hard to avoid a weakening Rand and increased interest rates.
That has a direct impact on consumers. Don’t think it won’t affect their ability to purchase your property. The reality is though, No one knows what will happen tomorrow.
In that case, I’d have to say that if you are thinking of selling at any time in the next 6-9 months, you should consider listing now, in a calm and stable market. You don’t want to be listed at the time the market changes and dozens of other sellers flood the market with competing stock.
Bear in mind it takes some time to prepare your property for sale and to get all the marketing ready to roll. It often happens that there is a flood of new listings on the market after the December school holidays. Do you really want to compete with them? Beat the rush and get the ball rolling well in advance, while markets are stable and calm.
Principal of Harcourts Platinum
Purchasing a property is a very exciting time in your life – but it can also be very frustrating if you don’t go into the process with a full understanding of what will be required of you, and how it will impact you financially.
To avoid the frustration of purchasing a property and losing out because your finance is declined, the very first thing you need to do is get yourself pre-qualified by a mortgage broker.
Don’t make the mistake of thinking that you’ll go to your bank, or that your banker has already indicated you’ll be fine for your bond. Your banker at the branch has absolutely no involvement in your bond application process, and no influence either. So find out from a neutral party such, such as Ooba, what bond you will qualify for.
Also, ask your loans consultant what loan-to-value you should qualify for. This will depend largely on your bank – but you will receive an indication of what deposit you will need. It’s important to note that the majority of 100% bond applications are rejected. That means you will almost certainly need a deposit – so budget at between 10-20% of your purchase price.
The deposit needs to be available, and not tied up in medium to long term investments that you can’t access. Upon signing an offer to purchase, you will usually need to pay a minimum deposit, that is often set at 10% of the purchase price – so have this available. It’s invested in a trust account and you get the interest on it until transfer.
It’s also important to know what transfer and bond costs you will need to pay. You can find this out from a website like http://www.ooba.co.za/calculators. On a property of R 2.5 million, with a 90% bond, your transfer and bond costs are just over R 178 000. So you’d need this in addition to your deposit.
There are also other costs to factor in. You will need home insurance. The bank doing your bond will offer you this, but often it pays to shop around for the best rate and terms. Don’t forget to find out what the excess is on the policy.
You also will have moving costs to budget for, and possibly installation costs for Telkom, satellite dish (if not already there), and the like. If you are part of a Homeowners Association or Body Corporate, don’t forget you will have monthly levies to pay – so find out what they are and set up the debit order.
Additionally, there are monthly rates and taxes to the local municipality. There is usually a delay of a few months after transfer until these accounts start coming through – so budget for this to avoid the unpleasant surprise of a 4 months’ rates bill later. The same applies to your water and electricity accounts.
Budget properly for your real estate investment and you’ll be sure to avoid unnecessary financial stress.
Principal, Harcourts Platinum
Many sellers wonder what kind of marketing is required when trying to sell their property. Is it really necessary to make use of a strong marketing plan, or you can get away with minimal marketing.
To answer that question you would need to answer this: Do you just want to sell your property? Or do you want to sell for the highest price the market will pay?
If you’re like most sellers, you will want the maximum price possible for your property. Assuming that’s the case with you, I can categorically confirm that you will need a comprehensive marketing plan that attracts the maximum number of qualified and motivated buyers.
It’s a fact that it’s only when buyers are placed in a situation where they need to compete against other buyers for a property that they will pay their maximum in order to acquire it. Let’s face it – we all want to save money if we can. So buyers will very seldom come in with their best offer unless they absolutely have to. It’s when they are competing against other buyers that they will submit their strongest offers.
That being the case, the question to answer is just how do you attract the maximum number of motivated buyers? Simply put, it will depend on the quality and effectiveness of your marketing. There are a number of different ways to market a property, all of them attracting different buyers.
Marketing methods include print marketing in newspapers, website marketing on the different property portals, database marketing to qualified buyers, for sale boards, show houses, flyers and drops – to name just a few.
Each method has a target audience, and each method has a measure of success. Individually, none of the methods harness all the buyers out there. But used collectively in a carefully tailored marketing plan, you will be able to capture the attention of all the genuine buyers looking for your type of property.
I often liken it to fishing. When you have a single line in the water you have the potential to catch a single fish. When you have multiple lines in the water your chances are greatly enhanced. When you use a fishing net you significantly improve your chances of success.
So when it comes attracting buyers to your property, would you be satisfied with a weak marketing plan that attracts only one segment of the market?
In addition to the need for a varied marketing plan, you also need the kind of marketing that will appeal to buyers’ emotions. After all, we make the decision to purchase with our emotions and justify it with logic. It stands to reason then, that the quality of the marketing and the way it’s delivered must appeal to the emotions in order to generate a strong response. When you make use of a comprehensive marketing plan that appeals to emotions you will attract strong buyer enquiry. Buyers will compete for your property and make you their best offer. It’s what you deserve.
Director, Harcourts Platinum
Many young adults wonder when the right time is to take the step of becoming a property owner. After all, your property usually is one of your most valuable assets – so it’s not a decision to be taken lightly.
There are pros and cons to buying vs. renting a property – but the main difference is that property ownership usually costs more than renting – at least in the early stages of ownership.
The reality is that, over time, when you buy property your debt reduces and in many cases your bond installment is actually less than the equivalent rent you would pay in years to come. Instead of paying off someone else’s investment, you are actually paying off a debt on your own asset that, over time, grows in value.
So if you can afford to, the sooner you can invest in property the better. As with all investments, it’s often about timing. Assuming your timing is right and you have the means to afford the commitment, property ownership should be seriously considered.
What often deters younger investors from taking the plunge is the “C-word” – Commitment. Unlike a rental, where you can easily move on at the end of your lease, ownership is more permanent. Sure, you can sell your property, but that will incur costs. So you need to view property as a medium to long-term investment.
Before you make the commitment, you need to be sure you can afford to. As a general rule, banks will allow you to borrow up to 30% of your monthly income. They will qualify you on your affordability and factor in potential interest rate increases. In doing this, they are making sure that you would cope with any rate increases and not be in a position where you default on your installment.
Also important to consider is your job stability. The banks will need to be sure you have stable employment and a regular income. It’s also important for you to consider this. With a significant monthly debt to service, you will need to be quite sure that, should you change employment, you are going to receive a stable income. If not, you may find yourself in the position that you struggle to make your monthly repayments.
Also important to consider are the other costs of property ownership. Rates and taxes, levies, maintenance, insurance – these and other costs need to be budgeted for. There will be other sacrifices you need to make in order to cover these additional monthly expenses. For many adults, the thought of making sacrifices isn’t that appealing.
However, if you are disciplined, sensible, and have factored in the costs properly, then property ownership becomes a real option for you. You’ll thank yourself in years to come when you realize any sacrifices you made were more than worth it! Whilst many of your peers will be stuck renting, you will own an asset that will assist you greatly in generating wealth and future income.
Director, Harcourts Platinum
Every seller wants to sell for the most market will pay – and so they should! But what can you do to ensure your property really appeals to the buyers so that they will fall in love with it.
The key is to create a positive emotional response from the purchasers. When a buyer has made the emotional purchase then they will be motivated to make a strong offer to buy your home.
That’s why, even before you list, there are many things you need to do to ensure you are ready. Here are some practical suggestions that will help you create that positive emotional response:
Having an objective approach can be hard, especially if you’ve lived in the property for many years. Perhaps you could ask someone to come and comment on your property and what needs to be done?
There are professional home stagers who are skilled at knowing exactly what needs to be done to make your home look its’ absolute best. In many cases this may not cost as much as you would think. It could even be that you only need to re-arrange some of your furniture to make a room look larger, or flow more effectively.
We’ve learned at Harcourts that small amounts spent up front to get your home ready for marketing can result in you selling for 10-12% more and getting the absolute most the market will pay. In order to show the benefit to property sellers we’re now investing in a home staging report for each listing we take. It will result in more buyers responding to the marketing, and with a much stronger emotional appeal, and result in a faster selling time at a higher price.
It’s only when a buyer has the emotional desire to buy a property – when they “fall in love with it” – that they will make their very best offer. This is especially true when there are multiple buyers who show interest and they have to compete for your home. So take the time before you list to ensure your property puts its’ best foot forward.
Principal, Harcourts Platinum
Director, Harcourts South Africa
Every investor wants the best return on investment possible, whilst keeping the risk at acceptable levels. There are a number of investment vehicles available, all with their advantages and disadvantages. For many though, the markets are so volatile that the risks outweigh the benefits.
Inflation levels in South Africa currently hover around 6% per annum. So if your investment isn’t growing by at least the inflation rate, you are getting poorer each year.
Take property for example. Official statistics for South Africa show the average increase in property values to be at roughly 6% per annum – that just keeps pace with inflation. So does that make property a bad investment?
As with every property investment, it would depend on timing and location. National property values may only have escalated by 6% in the last year, but Western Cape property values have escalated by just over 12% – double the national average.
Let’s drill that down a bit further. Most metros have shown growth of around 4% at most. However, the Cape Town Metro has shown growth of almost 16% – 3 times that of other metros. So, if you’d invested in property in many suburbs of Cape Town you may well have seen growth of 16% since this time last year. Now that’s a substantial return on investment that far outpaces inflation.
In addition to the capital growth, property gives you something else that most other investments don’t: a rental return. Rental demands have escalates significantly over the past 5 years to the point where, in many suburbs, there just isn’t any availability. It’s not uncommon to enjoy a net rental return in excess of 8% per annum, or even higher in certain cases.
When you consider your capital growth of 16% plus your rental return of 8%, it equates to a net annual yield of 24%. Now it’s true that you don’t actually see the capital growth return until you dispose of the property and you’re paid the proceeds. But the value of your asset certainly is there.
So for how much longer can we expect this kind of growth in the Cape Town Metro? There is no crystal ball. But when you look at the driving forces behind the market, it’s simply a case of supply and demand. There is a consistent influx of residents from Gauteng and KZN especially. In addition to this foreign buyers are still investing locally. Not only in our property still cheap in international terms, but there is no arguing that Europe has problems of its’ own that make living at the tip of Africa not such a bad option.
It’s unlikely the demand will show any signs of dropping off. There is a flurry of new development taking place, but land for new homes is limited. I’d say that for many suburbs in the greater Cape Town area, property remains the smartest investment, with outstanding yields, and very low risk.
Director, Harcourts Platinum
It’s hard to believe another year has almost passed. If we had to characterize the local real estate market for 2016 we would say it’s been strong, stable, and steady. There haven’t been any nasty surprises. Sure, we’ve had interest rate increases, but they were expected.
We expected a strong influx of buyers from Gauteng and KZN – and that’s exactly what happened. We were optimistic that strong buyer demand for local and Cape Town property would ensure our market stayed strong, despite the expected pressures on the national property market – and we were correct.
So what can we expect for 2017? There is no crystal ball, and we would certainly agree that we live in unstable times. Let’s look at the most likely scenarios for next year.
There is no reason to expect this to change. Our lifestyle is very desirable and our local infrastructure works efficiently. We anticipate this trend may even strengthen if municipalities in Gauteng become dysfunctional due to political infighting. We also expect the number of overseas buyers to increase as political problems in Europe and the USA increase – but that this should be in the mid-price-range.
Unfortunately, there are no indications that the economy will improve or that the Rand will strengthen. Continued pressure on our currency, increasing inflation, and the possibility of a ratings downgrade (we’ll know next week) will mean any movement will be upwards. Expect increases and budget for them. This will impact on buyers’ affordability and the prices they can purchase for.
As with all markets, pricing is driven by supply and demand. Demand will be high in the mid price range, but not necessarily at the top end of the market. We anticipate good property value growth of 12-15% in the mid-to-lower price ranges, with 7-10% in the higher price ranges.
In response to the increasing buyer demand, we are expecting to see a lot more new development over the next few years. Smaller homes on smaller plots in secure estates with strong lifestyle offerings will be the main offering – with luxury apartments and luxury boutique estates also being prominent. There are attractive investment opportunities for those who get in first and purchase off plan.
There is no doubt that, as crime levels increase, so the demand for security increases. As demand is strongest in secure estates, expect these property values to increase at a faster rate than those outside estates.
More and more homeowners are conscious of the need to conserve water and electricity. With new solar systems being more affordable and efficient, buyers will be attracted to properties that offer a “green” solution.
Let’s hope that the ratings agencies are patient with us. The outlook for property in the rest of South Africa is not nearly as rosy at is locally – with economic pressures set to increase. In any event, owning property is a smart investment and, barring anything unforeseen, we can look forward to another stable year for local property in 2017.
Principal, Harcourts Platinum
You’ve seen your dream home – the only problem is it isn’t built yet. Is it ever a good idea to buy off the plans?
The short answer is yes – there are many advantages to buying property before it’s been built.
The trick, as with any purchasing property of any type, is due diligence and when buying off the plan that means some investigation into the detail.
Some of the positives of buying off the plans are that you can often get the property you want, in a good location within the development, at a lower price by getting in early. Prices can often rise as a development nears completion, especially if it is proving popular.
By buying early you are securing a property in the market and can benefit from any market price increases over the period of construction. In some cases we’ve seen this as high as 16-20% growth by the time you actually pay for the property.
The potential negative is that you don’t end up with the property you thought you were paying for. There is the risk that it’s built and finished to a lower standard than you expected. There is always the possibility that the market may drop between the time you purchase and the time the property is completed.
Here are some things to think about before committing on a planned development:
Check your sources. Once you’ve found a suitable place, do some homework on the developer. What projects have they been involved in previously? How successful have they been? Do they have a track record of happy customers or a litany of complaints?
Be visionary. If you can, visit the development site and figure out where your chosen property fits. How much sun and natural light is it likely to get and at what times of the day in which parts of the property? How much outdoor space will you have?
What will the views be like? Make sure you have a clear picture of how big the property and all the interiors will be. Don’t rely purely on plans, artist impressions and show homes.
The devil is in the detail. You need to go over the purchase agreement thoroughly. Most disputes arise because buyers are disappointed the finished property is not up to their expectations. Make sure the contract covers everything the developer is responsible for.
You should be clear on how much the developer is permitted to deviate from the original plan during construction.
Contracts can also include a sunset clause which allows buyers a way out should the project completion be excessively delayed. However, buyers should also be aware that these clauses have on occasion been used as a loophole by developers to cancel contracts and resell at a higher price.
If you have questions, be sure to ask them so that you know exactly what you’re purchasing. When you go in with “your eyes open” purchasing off plan can be very rewarding.
Director, Harcourts Platinum
Source: Harcourts International