Buying property now more affordable – insights from BizNews Property Talk

Buying property is now more affordable, especially for first-time buyers. This is predominantly because of falling house prices and low interest rates, industry-wide data reveals.

Buyers, including a large percentage of first-time buyers, are entering the market in droves and taking advantage of cheap finance. Data from ooba shows that first-time buyers accounted for 54% of total buyers by Q3 2020. The Free State was the leading province with 70% mortgage applications processed for this segment.

The Absa Homeowner Sentiment Q3 2020 (see below) reveals that 42% of those surveyed believe investing in property is a good thing. Despite a negative economic climate, 36% of the respondents said property would offer good returns for investors. The report shows that 71% believe it’s a good time to buy, while 29% say it’s a good time to sell.

If you have been thinking of buying property, here are five reasons why property is a desirable investment asset:

Read also: Buyers’ market with real house prices set to fall for 5 more years – property cycle expert

  1. Falling property prices

Absa notes that low property prices remain the number one reason for the surge in buying property. House prices have been declining for years, and they are set to continue falling for the next five years.

In real terms they will continue declining, says Erwin Rode, property cycle expert and MD for Rode & Associates.

  1. Low interest rates

Interest rates are currently at historic lows – the lowest in five decades. In the past year, the Reserve Bank has cut interest rates by 300 basis points to date.  The prime lending rate is 7% per annum.

This has made it possible for those investing in property to access cheaper finance. Homeowners have seen a decrease in bond repayments as a result.

Current interest rates are the second driver for buying sentiment, according to Absa.

Read also: Capitec, banker for the masses, targets more affluent property buyers with easy applications

  1. Cheaper finance

Banks have loosened their purse strings and are lending again. In fact, they seem to be competing for market share.

Certain banks have a greater risk appetite for approving bonds with no deposit or lower deposit requirements, according to ooba.

  1. Many will continue renting for the foreseeable future

For buy-to-let investors, this is an ideal time to be buying property.

A survey conducted by TPN Credit Bureau reveals that 45% of people will rent property for some time to come. Of those, 21.71% will rent property for the foreseeable future.

Most tenants cannot afford to buy property right now, and they like the flexibility to move when leases expire.

Tenants also pay rent on time with those in good standing reaching 74.5% from 73.5% in Q2, according to the  TPN Rental Index Q3 2020.

Read also: Is buy-to-let investing in SA still a good idea? Here’s what the data says about tenants

  1. Renting is cheaper for many

Savvy investors need to do due diligence on the property and area they are buying into. It’s not only about capital growth and yields, it’s also important to know a tenant’s behaviour when it comes to paying rent.

The amount in arrears relative to rent peaked in July at 105.9%. From July to September, this metric dropped by only 3.5 percentage points to 102.4%.

According to PayProp Rental Index Q3 2020, this will take some time to reach a figure close to 80% last seen in March.

However, buying property should not be taken lightly. It’s a long-term game, and patient investors reap the rewards.

Got a question on investing in property you’d like answered? Write to [email protected]

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