No 'quick buck' in property

The old adage in financial markets is “buy at the bottom and sell at the top” and in an ideal world, that’s the way to riches. But it’s a moot point whether even the most shrewd investors get it right all the time, for the other adage is “for everyone who makes a profit there has to be someone who makes a loss.”

Be that as it may, the property market is seemingly coming slightly off the boil. According to ABSA, month-on-month house price increases have slowed since January, suggesting that the market is losing some growth momentum. This begs the question of whether buyers should wait for a possible further softening.

ERA Real Estate CEO Gerhard Kotzé takes the view, however, that provided you are already a property owner with your sights on another home, trying to time the market is pointless.

“If you wait to buy for less you will most likely also sell for less, since prices fluctuate in general unison, so if you are planning to move to an equivalent or more expensive property, you will not gain by waiting.

“The issue becomes a little more complicated if you are planning to downscale or buy into another area or town where prices are generally lower, but even then delaying a buying or selling decision is not usually the right option.”

Having decided to sell, owners may feel they should then rent temporarily and wait for prices to drop. “I would advise against that, however,” says Kotzé. “Everything points to continued rises in property values — albeit at a slower rate — for the immediate future at least, and most experts are discounting a property bubble.

“Gambling on which way the market is going to jump is therefore not good strategy as few will get their timing absolutely right. The real concern is to avoid taking out a bond that you cannot financially sustain, so that you avoid what’s known as ‘negative equity’ — where your home is worth less than your loan.”

On the other hand, says Kotzé, plenty of people have made money from property (in both bad and good times) by making judicious investments that are well-geared with relatively small up-front deposits and then having the patience to wait for values to increase.

“Property should always be viewed as a medium to long term investment. The current climate is no exception. Any temporary slowing in the market, if indeed that’s what’s happening, should be seen as part of the normal property cycle, which, historically, has always tended upwards.”

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