18 October 2023
South Africa’s property market is currently subdued, with the average time on market (the length of time a listing takes to sell) hovering anywhere from several weeks to several months depending on property type and area. According to David Jacobs, Gauteng Regional Sales Manager for the Rawson Property Group, this can be concerning for existing property owners looking to move to their next home.
“Most homeowners need to sell their existing property in order to finance their next purchase,” says Jacobs. “In an ideal world, both those transactions would take place concurrently, enabling the homeowner to move smoothly from one property to the next.” In reality, Jacobs says this timing can be tricky, since market conditions typically favour either finding a property or finding a buyer – seldom both.
“In seller’s market, it’s usually relatively quick and easy to find a buyer,” he says, “but it can take a bit longer to make a successful offer on a new home. As a result, we usually recommend starting with the purchase in these circumstances. Once you have a signed purchase agreement on the table, you can then start the process of selling your own home.” Jacobs says approaching a property transaction in this order will require certain clauses to be included in the purchase agreement.
“It’s standard practice to make the purchase subject to the successful sale of the buyer’s existing property within a specific timeframe,” he says. “A minimum sale price may also be specified, along with finance approvals, if required. It’s also important to detail occupational rent and occupation dates, keeping in mind the possibility that the two property transfers may not exactly coincide.”
In a buyers’ market like the present, Jacobs says conditions are reversed, making it faster and easier (on average) for people to buy a new home than to sell their old one. In this case, it may be advisable to list your existing property at the same time as – or even before – starting your own property search.
“It can be stressful to contemplate selling your existing home before you have a new one lined up,” says Jacobs. “It’s possible to make a successful offer to purchase, within a specific timeframe, a suspensive clause in your sales agreement. However, this can be a deterrent to buyers and end up backfiring in the long run.”
Jacobs says it’s generally wiser for homeowners to have a plan for temporary accommodations, if necessary, in the event that finding their new dream home takes a little longer than expected.
“The benefit of selling first is that you’ll have any equity from your sale available immediately to use for your own purchase,” says Jacobs. “That means you may not need to save up for a deposit, and you’ll be in a strong negotiating position with sellers as well as lenders if you require additional finance.”
It may not be necessary to sell your existing home at all. Jacobs says turning your existing property into a rental investment can be a very smart choice if you don’t need the immediate cash in hand.
“Not everyone has the means to make a purchase without selling their existing home,” he says, “but, those who do, have the option of using rental income to finance the bond repayments on their old property until such time as it’s paid off and starts generating income.”This is a particularly compelling option when rental yields are high and property prices low.
“Going this route enables owners to ride out less favourable sales conditions while creating an income-generating asset that could become the foundation of a profitable property portfolio,” says Jacobs. “Of course, it does rely on your property’s ability to achieve a rental yield that equals or exceeds its operating costs. As such, it’s always advisable to run the numbers with an experienced rental agent before making any decisions