Property experts are optimistic about a future interest rate cut.
Category Advice
Property experts are optimistic about a future interest rate cut.
The latest predictions in the interest rate suggest that we'll see a cut in September and possibly November as well. In the meantime, there are still plenty of opportunities on the property market for those willing to put in the effort, stay focused, remain positive, and work the strategic angle.
The Current Landscape
It's no secret that the market is feeling the strain. "We are seeing a significant increase in properties listed in the higher price ranges and a surge in rental demand as many struggle to keep up with their bond payments.
This trend is echoed in the prolonged average listing times, with homes now spending an average of 92 days on the market - a stark increase from 69 days in 2015. First-time buyers, in particular, are feeling the pinch, with affordability dropping on what feels like a daily basis.
Affordability issues have affected demand across the board, and we've also seen a notable rise in distressed properties as existing homeowners fall behind on bond repayments.
Strategic moves for buyers and investors
The current market conditions might seem discouraging, but there are a number of strategic moves that buyers and investors can make to position themselves advantageously for the future.
Stay informed and ready
Don't wait for the perfect opportunity to come to you. Stay informed and get prequalified so that you're ready to act quickly when the right property comes along.
Consider joint bonds
For those struggling to meet bond requirements alone, joint bonds are an increasingly popular option. Co-owning property with friends, family, or partners can maximise your buying potential and share the responsibilities of maintenance, laying a solid foundation for a future property portfolio. Just make sure you have rock-solid contracts in place to protect your interests in the event of future disagreements. No matter how much you trust your co-owners, always get the nitty gritty locked down in black and white.
Here are some spending habits to avoid ensuring future bond approval, take a look:
Don't allow your credit score to drop
As difficult as it may be right now, aspiring buyers need to make sure that their credit score doesn't get marked over this time. It can take months and even years to clean up a credit score if you miss a payment or fall into bad habits with your repayments. Do whatever you can to ensure that all debt repayments are made on time and in full every month. Remember that the worse your credit score, the lower your chances of bond approval and the higher the interest rate the bank will provide on the loan.
Don't take on additional debts
As tight as your household budget may be, try and avoid purchasing anything on credit at this time. The high interest rates make credit purchases incredibly expensive right now, but it also cuts into your disposable income. If possible, try to pay off as many debts as possible to increase your affordability levels. Disposable income is a key element to bond approval and acquiring a higher home loan amount.
Build up a stable employment history
For those who plan on purchasing a property within the next year, it is important to know that financial institutions require a stable employment history of around 6-12 months. If you happen to be retrenched or decide to change jobs, your loan application might not be approved until you've been employed for a long enough period of time. If you can avoid it, try not to change jobs just before applying for a home loan. Rather wait until enough time passes before submitting a home loan application.
Focus on rentals
While property sales may be sluggish in some areas, the rental market continues to show promise, with tenant payment behaviour remarkably strong given the financial pressure on most South African households.
The rental market often benefits when high interest rates make it difficult for tenants to transition to first time buyers. This trend may shift as interest rates start to decline, but we don't expect a drastic effect on rental demand - particularly in popular areas. In general, the rental outlook is very positive, and we expect to see good growth in the near future. In the meantime, it is advised that landlords should minimise risk and focus on improving long-term growth potential.
Prioritise the placement and retention of quality tenants and set time and budget aside to stay on top of maintenance and improvements that will protect your rental asset's value in the long run.
Looking ahead
There's no denying that market conditions have been tough, but they won't last forever. Those who make smart, informed decisions now will be well-placed to take full advantage of the upswing when it arrives. Agents are putting all of their expertise, creativity and strategic skill behind their clients to ensure they are well-prepared for the future.
Extract from Property 24
Author: Extract from Property 24
