How Do I Break Into the Property Market in South Africa?

Worldwide, consumers are feeling the tightening strangle hold of increased commodity prices, petrol price hikes and the damning effects of the worst global melt down in eighty years, but not all is gloom and doom for the South African economy.

Fortunately we have been relatively unscathed by the collapse of the banking and investment sectors in both the USA and EU, which to a great extent was fueled by the inordinate greed of a few decision-makers.

Interest rate cuts on the cards for next year

The recent announcement by the monetary policy committee of the South African Reserve Bank to leave interest rates unchanged for the second consecutive time in the past four months will, without a doubt, help restore confidence in the flagging property sector and make this the time to invest in property.

That there is a real possibility of an interest rate cut early next year and with recent news via some of the top real estate agents in South Africa that the property market is showing early signs of buoyancy are both very good pieces of news for property owners and prospective buyers.

Although many South Africans may still feel that investing in property is out of their grasp, this is largely not true as there are always ways and means of getting into a sector, and it seems that long-term is expected to rebound to its heady heights of the boom.

Partnerships back affordable housing

There have been innovative partnerships between South African banks and local and international finance houses that have added clout and financial backing to affordable housing. In 2007, for example, one local bank forged an alliance with the French Development Agency to borrow €40 million to help prospective buyers with a joint monthly income of R7500 or less to purchase their own homes.

Lower your sights and buy smart

Instead of waiting for the opportunity to buy that dream home, lower your sights and aspirations. One sure fire way of breaking the property logjam is to buy a flat or apartment that you can afford.

Although it may not be the perfect home for you and your family, you can always wait for the expected up turn, sell at a tidy profit and re-invest in a more expensive property. In this way you can build up your property portfolio brick- by- figurative-brick.

Buy to let

Another way of breaking into the property market is to buy with the intention of letting. The majority of letting agents canvassed recently have indicated the demand for rental property is on the upswing, particularly in the past 6 months.

Landlords are also beginning to see acceptable letting returns, with Gauteng leading the way. Year-on-year flat rentals in Johannesburg and Pretoria ended, on average, 25% higher, far surpassing the 9% consumer inflation growth rate.

The other good news is almost 60% of all rental property is rented out in under a month, making it a very viable investment.

The quick guide to buying property

• Rather save for a sizeable deposit before making the purchase. If you buy with an 80% – 100% mortgage bond you can’t possibly expect the rental accrued to cover the costs.
• If your intention is to ‘buy to let’, shop around for your home loan – certain financial service providers offer home loans designed especially for ‘buy to let’ clients that take into account potential rental income.
• Invest for the long term and focus on building your wealth over time. This will mean that you are not held at gun point by short-term fluctuations.
• Remember that you can have a steady income from your property and enjoy the capital growth over time as well.

www.abfinfinance.co.za