It’s always a good time to buy or sell property if you intend staying in the same area and buying soon, says Lanice Steward, MD of Anne Porter Knight Frank.
The first point to be grasped is that anyone selling and buying in the same market will iron out the fluctuations that have occurred in the last year or more: if they sell for less than expected, it is probable they will be able to buy at lower than they budgeted for.
“So long as you are buying and selling at genuine market prices, what you “lose” on the sale you are likely to “gain” on the buy. House prices react uniformly to market conditions. If you sell at a price lower than expected you will probably be able to buy lower too.”
If, however, sellers who are downscaling, to realise cash sums (because of difficulties in meeting bond payments or other debts) in a poor market, may well end up still owing the bank a fair sum on their bonds – and it is frightening how these still-to-pay bond debts can mount up, says Steward.
“This is especially the case when the house is repossessed and put up for auction. In these cases it is not uncommon for homes to be sold for less than the price on which the bonds were negotiated and the banks will still hold the bondholders responsible for the outstanding amounts.”
Even in this situation it is essential to be realistic and to sell sooner rather than later.
“Some home owners (who bought at high prices in 2006/2007 and who are now in debt to their banks) are desperately hanging in there in the hope that the market will recover faster than it is doing. The nett result is that they end up with even greater debt.
“In these tight spots the banks have often done deals with the bondholders, for instance allowing them initially to pay the interest only. Usually there is no need to despair if you are open with your bank,” she says.
If after buying a home the owner finds that the market is tailing off and the home’s value is depreciating, this should not be a cause for concern, so long as the owner can still afford the monthly repayments.
“Experience has shown that the downturns on average last 32 months. If, therefore, the buyer does not sell too quickly, it is highly probable that he will make a profit. Typically, South Africans upgrade every seven years, by which time a capital growth is almost guaranteed.”
Steward warns, however, that the heady days of 2004 to 2007 when prices shot up at 30 to 40% a year, are unlikely to be repeated. She expects the annual growth rate for the next two years to be about 8%.
“Over an extended period such increases do add up significantly – and it is always better to be paying off your own bond and slowly building an asset base rather than to be helping a landlord do this by paying rent.”
