Silver Linings Property Playbook - Part 3

A huge swathe of the economy has been opened during the month of June. Real Estate were one of the lucky customer-facing sectors that could operate from the 1^st June 2020.  In 19 post-lockdown days, real estate agents have seen a flurry of activity driven by pent up demand and historically low interest rates.

This activity may prove to be a spike in a slow year as the economic realities of the COVID-19 crises set in. However, there are two sentiment-based drivers, which in addition to the record low interest rates may see 2020 be a far more positive year than anyone could have expected.

1. The COVID-19 enforced lockdown has pushed residential property to the front of the property priority list, ahead of retail and commercial properties. Whereas working from home and shopping online has diminished the importance of the latter two categories, being home-bound for two months has highlighted the importance of securing one's own home and investing in residential homes.
2. The biggest driver of negative sentiment in the residential property market since the economic apocalyptic event of "Nene gate", was the country's threat of being downgraded to JUNK STATUS. Since the downgrade, which was largely concealed by the lockdown, none of the worst predictions have materialised. Rather, there has been a healthy appetite for South African bonds, our currency is improving against the dollar and most importantly the cost of borrowing is extremely attractive.

If you choose to look at the residential property market through these "rose tinted" glasses, there really has not been a better time to buy a home. There are several factors as detailed in our previous Silver Linings Property Playbook articles that will cause sellers to accept offers. Namely sellers being adversely affected by the lockdown and seeking the comfort of liquidity, and sellers, including developers, seeking a seamless transaction.

Below is a step-by-step guide to purchasing a home in this changed landscape. As South Africans trade their homes on average every eight years, look at a good long-term investment at the best possible price by doing the following:

• Identify a property that would appeal to the widest market possible. For example - in an area that appeals to families, opt for a single-story home with four bedrooms in a secure environment.
• Identify an area that has long-term growth prospects. You can do this by looking at an area that has a high growth commercial zone and/or a commuter hub. A good example of these would be the Dube Tradeport and Umhlanga Ridge Precincts. Draw concentric circles around that area, in 3 x 10km intervals, then consider those areas with an existing road network and close to amenities. The area towards the outskirts of those circles, will probably be more affordable and have long term growth potential.
• Enquire and discuss the seller's circumstances with your agent. Sellers in a market such as this will be inclined to share their reasons for selling and their necessity to sell.
• Enquire what the rental amount on the property would be. Calculate what a 100% bond repayment on your offer amount would be verse a rental option. If the rental amount equates to 80% of what your bond repayment would be it is a great deal for you.
• Ensure that you have your bond preapproval, deposit amount and cash component for transfer costs, before making an offer. This will ensure that the deal is seamless for the seller and make it easier for them to accept.
• Most importantly, do not try and win the transaction. If you have done the above correctly, the property you are purchasing will be a good property and in demand. Putting in a solid offer that is seamless for the seller will ensure that you get your future home.

If you follow the above steps you will secure yourself a great home that will prove to be a terrific investment.