There's no time like the present to become a home-owner
Potential buyers should not spoil their own chances of becoming home-owners by worrying too much about interest rate movements or property market cycles, says Gerhard Kotzé, MD of the RealNet estate agency group.
"With buying a home, as in purchasing shares, market 'timing' is not the only factor that should be taken into account - and the most successful investors know that while buying low and selling high is important, you can also only make money when you are actually in the market.
"They don't sit on the side lines trying to figure out when certain stocks will hit their absolute lowest or highest values but do try to buy those with good growth prospects and the ability to keep delivering good returns. And we think consumers should look at home buying in the same way."
Apart from interest rates and home prices, he says, prospective buyers need to consider variables such as the type of home they want, price trends in the particular area that they prefer, possible renovation costs, transfer costs and the availability of finance as well as favourable interest rates, and be prepared to jump into the market when it seems that most of these factors are lined up in their favour.
"Honestly, there is very little chance of achieving 'perfect timing' in the property market. Many of those who have waited for interest rates to drop in the past so that they could keep their bond costs down were thwarted by the fact that prices were rising faster than interest rates were falling. They then needed bigger bonds anyway, and in some cases couldn't afford the homes they wanted because their incomes had not kept up with home price growth.
"Similarly, those who have waited for their incomes to grow sufficiently so that they could afford their dream homes have often been blocked by rising interest rates, even if home prices were only growing slowly as they are now."
Consequently, says Kotzé, those who want to be home-owners should rather concentrate their energies on actually getting into the market - that is, on finding a home that suits them in an area with good growth prospects, at a price within their home loan qualification limit.
"And their chances of doing so right now are actually really good, especially with the help of a reputable, qualified estate agent who knows what they are looking for and is prepared to guide them through the purchase process. Stock levels are still high in most areas, which means that potential buyers have more homes to choose from and more scope to negotiate price.
"At the same time, there is a heated battle going on among the banks for new home loan business, and they are offering competitive interest rates and bond packages to attract new clients. First-time buyers with good credit records but not much cash may even have the option of a home loan that includes the bond registration, legal and transfer costs."
Buyers who take the plunge now, he says, will find that while interest rates are bound to go up and down during the term of a home loan (usually 20 years), their actual bond repayments will tend to average out - while the value of their property investment keeps rising, and gearing continues to work in their favour to help them build real wealth.
"On the other hand, population growth and rising demand for rental homes, especially in SA's urban areas, mean that those who buy investment properties now stand to benefit from both rental and capital growth over the lifetime of the bond, proving the worth of their property purchases."