Many property Sellers are in the position where they are weighing up whether they should sell now, or wait until the market improves. So what do the economists say, and what factors should you consider when making a decision?
Let’s look first at what the economists have to say. Both FNB and ABSA publish regular reports on the South African property market, and give their opinion on where things might go in the next few years.
While it’s acknowledged there are a number of global issues that could have a significant impact on the future, such as the Eurozone and US Debt crises, both banks seems to be of the opinion that, over the next few years, inflation will outpace growth in property values.
So, in real terms, if you sell today for R 1 500 000 it is better than hoping for a 3% growth in your property value, when inflation is estimated at 6%. Your net loss would then be 3%.
There is also a general consensus that interest rates will begin to increase towards the end of 2012 and into 2013 – and this will exert downward pressure on property values, perhaps even threatening the conservative estimate of 3% growth.
So the reality is that property values are unlikely to increase over the next few years beyond inflation rates – and that, if you need to sell in the next few years, you should seriously consider selling now.
Here are some additional factors to consider:
- If you sell low in this market, you should also be able to purchase low. In many cases, especially if you are up-scaling, you are better off.
- If you are changing your lifestyle, such as simplifying as the children leave home, retiring, or purchasing a larger home because of a growing family, then, provided you can afford to, there is a strong argument to make the move. Waiting is not an option in many cases. And any wait would have to be 3 to 5 years to see any significant change in the market.
- If you are experiencing debt problems which are unlikely to improve, and you owe more on your property than it’s worth – then it makes sense to sell now and make use of the favorable terms the banks are offering to repay the debt – in many cases, interest-free. The longer you wait the greater your debt. Take control of the situation while you still can. If you default the banks do not offer the same terms and your creditworthiness will suffer.
- If there is no need to sell – then don’t. Selling and purchasing a property does not come without costs. So, if none of the above points apply, then stay where you are and enjoy your home.
The truth is that even in a tough market you can still achieve a fair market value. There is no need to give your home away. Speak to a professional real estate company to find out how.
Principal, Harcourts Platinum
Director of Harcourts South Africa