Archive | March 2013

Three years to save a deposit, unless…

Saving for a depositEveryone knows by now that there are many advantages for homebuyers who pay a substantial deposit, but there are many who worry that by the time they can save enough, they will have missed the boat on low prices and low interest rates.

Could this be true? Just how long is it likely to take – assuming that they are serious about buying and, unlike most South Africans at this stage, also dedicated savers?

According to the latest BetterBond statistics, the average home price currently being paid by first-time buyers is R678 000, and the average deposit required of such buyers is some R68 000 – or just over 10%.

Meanwhile, the most recent Census figures show that the average earning of a two-income household in SA is now some R17 200 a month.

Thus those who are able to save 10% of their earnings a month (R1 720) would need more than three years (39,5 months) to save the 68 000 – by which time it is indeed likely that home prices will have moved up and that interest rates will have come off their current lows.

Wages and salaries are also likely to have gone up too, of course, but a large proportion of such increases are likely to be eaten up by rising food, power and transport costs as well as rent increases, leaving prospective buyers unable to raise their savings level by much.

The answer is for those who are keen to keen to get into the property market soon to lower their sights and buy a less expensive home to start with.

By doing this they will replace their monthly rent payment with a bond repayment on an asset that is increasing in value, and should also be able to divert what they were saving for a deposit into their home loan account, so that they quickly build up additional equity in their home. This can then be used to help them “trade-up” to a bigger and better home in a few years’ time.

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Don’t let a mixed picture put you off

mixed views on the home marketThere’s “good news and bad news” for prospective homebuyers in this month’s statistics from BetterBond, which is SA’s biggest mortgage originator.

The good news is that the banks are granting more bonds – the figures show that in January, almost two-thirds (63%) of the home loan applications made through BetterBond were approved and taken up by the applicants, compared with only 47% a year ago.

And since the company’s statistics represent a quarter of all residential mortgage bonds being registered in the Deeds Office – and include applications to and bond grants from all the major lending banks in SA – this is a good indication of what is happening across the market.

“There was also more good news for buyers this month,” says BetterBond CEO Rudi Botha, “in the Reserve Bank’s decision to keep interest rates unchanged at their current 40-year lows. This extends the opportunity for homebuyers to qualify for bonds more easily as they are more likely to be able to afford the monthly repayments.”

The not-so-good news is that the number of 100% home loans being granted continues to fall, as banks insist that buyers invest some of their own money in their homes in the form of deposits. The BetterBond statistics show that in January, only 20% of approved bonds were for 100% of the property purchase price, compared with 21% a month previously, and 22% a year ago.

“The average deposit required in January,” notes Botha, “was 18,7% of the purchase price, which was more than the 18,5% required in December but better than the 19,6% required a year ago.

“However, this overall average hides the fact that much lower deposits are required in the lower home price categories – which is more good news, especially for first-time buyers and those downscaling to homes in the R250 000 to R500 000 bracket, where the average deposit requirement at the moment is just 10%.”

This should make it much easier for such buyers to save up the necessary deposit, he says, “and it’s very important that they do so as soon as possible, not only because it will make it easier to obtain a bond but because it could save them a really significant amount over the 20-year span of a bond.

“For a start, property prices have resumed a steady upward trend and the longer buyers wait now, the bigger the bond they are likely to need, and the higher their repayment will be every month. In addition, those who do obtain 100% bonds now sometimes have to pay a premium interest rate above prime, which could add much more than the initial deposit amount to the ultimate cost of their home.

“But buyers need more information about this and other long-term implications of their home financing decisions, and for independent advice on keeping their home acquisition costs down as well as obtaining the most suitable home loan, they should consult our experts – free of charge – as the first step in the buying process.”

SA market still among the leaders

The Home TruthsAccording to the annual ‘Home Truths’ article recently published by The Economist, the rate of house price growth in SA is currently the third highest in the developed world at an average of 5%, with only Hong Kong (21,8%) and Austria (10,1%) doing better.

This may come as something of a surprise to those who have wondered just how much longer it will be before local property prices return to real-term growth, but The Economist’s figures also show that over the past five years (to end-2012), only six countries have experienced higher house price growth rates than SA.

These are Austria, Canada, China, Hong Kong, Singapore and Switzerland – and several of these, even China, are currently on a slower growth track than SA (see table).

The Economist points out that in Canada, for example, the annual rate of growth in the fourth quarter of last year was only 3,3%, compared with 7,1% a year earlier.

Meanwhile, although SA prices have only grown by 12,2% over the past five years, the local market still looks pretty good against the US, where prices have shown a 20,5% decline, not to mention Spain (-24,3%) and Ireland, where an utterly depressed market has seen property prices literally halve in the past five years.

And there is more good news for the SA market, too, in the latest Absa and FNB property publications.

The former shows that year-on-year housing price growth is now moving ahead of inflation in several areas (Port Elizabeth, East London and the KZN South Coast, for example) and in specific sectors in other areas, such as medium-sized housing in Mpumalanga, Limpopo and the Tshwane metro, and smaller housing in the North West and Northern Cape. Large homes in the Western Cape are also showing inflation-beating price gains.

And according to FNB’s latest survey of estate agents, the average listing time of properties declined to between 15 and 16 weeks, compared to almost 18 weeks in the first half of 2012. In addition, while 85% of property sellers still have to drop their price in order to sell, this drop has moderated from an average of 13% of asking price in 2011 to 10%.

Best of all, the survey showed that 13% of agents now regard stock constraints as a limiting factor when considering near-term market prospects. This is double the 6,5% of agents who cited stock constraints in 2011 and indicates a broadly improved balance between supply and demand in the market which should, in turn, underpin continued house price growth.

Want success? Live completely in the moment

That’s the advice of brilliant Real Estate Champions coach and trainer Dirk Zeller, who suggests the following four ‘rules’ as the foundation of an outstanding real estate career:

  1. Be there. To start with, this means being where you should be physically, and on time. “Being on time for a listing/ mandate appointment can often make the difference between getting the listing and not getting the listing,” Zeller says.
    Quoted on Realty Times he notes that being there also means preparing properly for every meeting, and “treating your real estate career like a real job” – putting in the hours every day whether you are at the office, working at home, or on the road with prospective buyers.
  2. Focus mentally. This means concentrating only on what you are doing at the moment, and not allowing your mind to wander – to what shopping you need to do or the messages on your smartphone, for example. “The better you focus mentally the more results you will get for the time invested,” Zeller says.
    “If you need to listen to the client…focus on what the client is saying. If you are formulating your answer or response (or doing something else), you are not listening to the client. Focusing means really paying attention to the details – and it always comes before success.”
  3. Tell the truth. Agents often have to tell people things they don’t want to hear. That their home probably won’t sell for as much as they hope, for example, or that their offer to purchase was not successful, or that their transfer hasn’t been registered yet.
    And unpleasant as it may be, Zeller says, they should always, always tell the truth.
    “Many agents will take listings when the asking price is too high and deal with the need for a price reduction later. But it’s better to tell the truth even if you lose out on the listing and that makes you sad. You will know you didn’t compromise your honesty and you will not have to spend your valuable resources on trying to market and re-market overpriced listings.”
  4. Accept the outcome and move on. “Too often agents let the highs get too high and the lows get too low. Once you’ve done your best, you need to accept the results you get and move on. If you don’t like them, move on and make changes to try to get a different outcome next time. Do not continually worry about the lost deal or you won’t be able to focus on the one that is currently in front of you. Remember, the process of your daily disciplines and the improvement of your skills are what you can control.

Real Estate Agent

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