The lowest interest rates in three decades, combined with tight credit and depressed property prices, make this an unusually good time for homeowners to upgrade to bigger or more luxurious properties.
“It’s true that many people are still downscaling for financial reasons, but according to the latest FNB Property Barometer, some 16% of home sellers currently list upgrading as their main reason for selling,“ says Berry Everitt, MD of the Chas Everitt International property group. “There are always people who need a bigger home to accommodate an expanding family, for example, or who want to move to a more upmarket area.
“Quite a number of those who sell primarily for security reasons also intend moving to a more expensive property in a gated village or estate, for example, and we also find that many retirees whose aim is to move from a big family home will actually upgrade in terms of luxury features and area when they select their smaller retirement properties.”
And now, he says, is a really good time to be making this sort of move. “Currently nine out of 10 sellers are prepared to lower their asking prices in order to achieve a sale, with the average concession being around 11%. What is more, we expect this openness to negotiation to increase over the next few months as sellers get anxious about their year-end relocation plans and the possibility of an interest rate rise that will not only increase their holding costs but may influence their ability to secure home loans for their next purchases.”
Of course, says Everitt, no one wants to take a “loss” on their property, but sellers who plan to upgrade are coming to appreciate that they stand to gain substantially by achieving a quick sale that sets them free to do so.
“If you have a R1m property on the market and have to take an 11% drop in price to achieve a sale, for example, you will “lose” R110 000. However, if you can then buy a R1,5m house for 11% less (R1,335m), your net gain will be R55 000,” he says
“What is more, if you do it now while interest rates are still low it should be much easier to get a bond for your next home than when rates start rising again, which they are expected to do towards the end of this year. The household earnings required for a bond of R1,2m are currently around R37 000 a month, but if you wait until the mortgage interest rate rises to 10%, for example, the earnings required for the same bond would be around R39 000 a month.”
In short, he says, the current market presents an unusual opportunity to get “much more house for your money” – and achieve higher than average growth when property prices start rising again.
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