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Doomsayers tell us that the property market is dead. Agreed that prices are no longer rising and there is serious evidence of a genuine fall from astronomical highs at the end of 2007, but that is hardly surprising. Many knowledgeable property gurus has been predicting a slow down in price rises even without the current spate of interest rate hikes. In fact property prices and particularly home prices (houses, flats and townhouses) had simply outstripped buyer’s ability to buy!
Interest rates have certainly had their effect on the market. Buyer’s ability to buy has dropped in inverse proportion to the increase in home loan rates. But an interesting phenomenon has begun to emerge. Serious, but cautious buyers! Realising that sellers are now serious about selling real buyers are coming out of the woodwork to look for good buys. It is still very difficult to match sellers with value for money property as sellers have not yet come to terms with the fact that it has suddenly become a serious buyers market. Sellers are still trying to sell at last year’s prices but they are rapidly realising that in the current market if they want to get out of their high bonds then they need to sell at what buyers are prepared to pay. Generally buyers are not insisting on bargain basement prices but are prepared to pay quite realistic prices.
A further interesting happening is that many institutions have come into the market to pick up commercial buildings at real return based prices. An example of this would be the recent sale of Mimosa Mall in Bloemfontein. Offers have been received for blocks of flats and interest has been show in hotels in recent months.
Said Mike Spencer of Platinum Global “We recently sold Parnon Court in Charles Street to a Johannesburg based company. Sold for an undisclosed amount the 75 unit building is well positioned close to the Waterfront complex. This and other groups are looking for similar acquisitions and have already made offers on three other blocks in the city.” Mike said that their buyers were prepared to look at other main towns in the Free State and in other parts of the country. Other major buyers were also looking for similar properties countrywide.
Mike also commented that his company had buyers for medium to large hotels around the country.
Commenting on the surprising emergence of investor buyers Mike said “ While some investors are now finding the going tough, especially if they have numbers of properties with large percentage loans, many investors has sizeable cash reserves and were eager to make use of the opportunity of buying property at sensible returns.” Mike said that property remained an excellent medium to long term investment and predicted that buyers who got into the market at this stage would be very pleased with their purchases by 2010 and thereafter. “Now is the time to look around and be choosey. We just have to look back an remember prices as they were in 2000 to realise what good buys people made during the early 2000’s. We simply got caught up in an unsustainable rise in prices and sellers now need to take a breather and put their feet back on ground. There is nothing wrong with the market which a price adjustment will not fix.”
Mike commented that buyers need to be realistic and understand that first time buyers would never be able to afford palaces. The traditional entry into the property market was through one and two bedroom flats before buying a house. Said Mike this is an excellent starting point as smaller units are not only more affordable but can be paid off quickly creating a real deposit for home buying.
Small units also made excellent investment properties as there was always a strong demand for one and two bedroom flats and townhouses from the letting market. Particularly good buys could be found in the middle of the range market.
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