With interest rates continuing to rise, the focus on investing in property has shifted to the affordable sector, turning properties in the R300 000 to R600 000 bracket into the most buoyant and lucrative segment of the South African property market, says Bill Rawson, Chairman of Rawson Properties.
Two trends are, says Rawson, quite clear. 'Firstly, the real action in the market is now in this lower and lower middle income bracket. Secondly, because many here will still struggle to find the R3 300 to R6 600 per month needed to buy, this is now a good sector in which to invest as it offers good rental opportunities'
Rawson said that the swing to lower priced homes has resulted in certain Rawson investors owning four, five or more of these units '“ and, he said, it is encouraging to see that some of the original previously disadvantaged owner-buyers in this sector also now own more than one property, preferring to rent out rather than sell and make a quick profit.
Rawson said that virtually all those who have bought middle range homes have seen excellent returns on their homes but those who have made improvements to their properties have seen additional growth.
'The old adage,' he said, 'remains true '“ R1 invested in a property improvement, results in its value going up by R2. Carrying out well planned, tasteful renovations is still the best way to increasing a rental and value by a really significant amount'
The anticipated further interest rate increases are unlikely to affect the average homeowner in South Africa, said Rawson.
'If they did not over-extend themselves on their original loan, they should find it possible to maintain their monthly bond repayments '“ although they may well have to cut down on a few lifestyle trimmings.
'A man paying off a R500 000 bond on which he has put down a 10% deposit, now has to find R4 954 per month to meet his repayments. The anticipated further 1% increase (0,5% in December and another 0,5% increase in February) would raise this to R5 274 - a sum he would probably find still within his means'
Rawson added however, on a R500 000 bond most property owners will effectively be paying R783 more in February than they pay currently. 'This is a significant hike,' he said.
Some of those hoping to buy in the R300 000 to R600 000 bracket, added Rawson, will probably find that the slightly increased interest rates are putting homes beyond their reach. 'Luckily the Minister of Finance scrapped transfer duties on properties below R500 000 and that gives buyers in this market some financial relief'
Looking at the market across all income levels, Rawson said that the latest FNB Property Barometer shows that 74% of homes are selling below the asking price. This, he says, indicates that the long-awaited adjustment of prices has now kicked in.
'Sellers,' he said, 'have at last recognised the shift in the market and have come to terms with reality. This is particularly evident in the top half of the market'
