The beginning of 2020 saw a real estate market that became more favourable for buyers with increasingly large numbers of home loans being granted by banks and interest rates being cut to lower than they had been in a long time. This is above and beyond the fact that the transfer duty threshold was lifted to R1 million, making the purchase of a property more affordable for everyone.
Prior to the lockdown, the marker proved to a rather favourable market for buyers. But will this still be the case now?
What sets real estate investments apart from others is the fact that the property itself is able to withstand the pandemics and crises of the world, making it a much safer and more reliable investment than any found on the stock market. The strength of property market rests on the inherent strength of property itself. While the real estate industry has undoubtably been impacted, the reliability of the properties themselves are what ensures the real estate market’s quickened return to stability.
With the basic need of housing still present, and tenants having to find new renting opportunities as leases expire, the fact that the structures are unaffected allows the real estate market to gain activity quickly. This means that buyers and sellers alike will conduct business in a market whose efficiency has remained reasonably unaffected.
With real estate activity slowly returning, property listings will soon increase again and offer buyers an abundance of choices, with the economic effects of the lockdown obliging many homeowners to reconsider their residential circumstances. An advantage that buyers should make use of is the fact that many sellers may be willing to lower prices to gain financial footing again.
Where household incomes have been affected by the lockdown, buyers will fortunately have the opportunity to enter what will prove to be a very negotiable market. Beyond the fact that sellers may be more open to altering their asking prices, the required income for a home loan of R500 000 has lowered from R19 300 to roughly R16 400, with repayments dropping from R 4825 to R4 100, over 20 years, for the same amount.
However, the economic effects should not be ignored by buyers. Interest rates are bound to increase again and the uncertain economic landscape may bring about adjustments to the current favourable environment that may influence the affordability of purchases down the line. Banks will become more cautious in the times to come when it comes to loan approval. With so many households’ income having already been affected, and the greater impacts of the lockdown and pandemic on the economy still to be seen, banks will be more concerned than ever with the safety of an applicant’s income.
The real estate market may indeed still prove to be favourable for buyers, but it is important for buyers and sellers alike to plan holistically and to prepare for the economic changes that are bound to be on the horizon.
This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)