Best to build or buy?

One of the most pertinent reasons for buying into the housing market right now, says Mike Greeff, CEO of Greeff properties, is that 'second-hand' homes (i.e. those that have already been occupied for a few years) are still some 25 percent less expensive than recently built homes of roughly the same proportions.

"Figures relating to house price increases,” said Greeff, "vary depending on which authority you consult but most would agree that the price rises were in the order of 25 percent in 2006 and 20 percent in 2007 with a levelling off taking place from the second-quarter of 2008."

By contrast, the FNB figures for newly completed homes show that building costs rose just under 40 percent in 2006, 24 percent in 2007 and by 14 percent in 2008.

Much cheaper to buy 'second-hand '

"The nett result is that right now it is almost always considerably less expensive to buy a second-hand home than a new one."

Asked to explain the spectacular rise in building costs, Greeff said that the surveys show clearly that it was materials — steel, cement, bricks, timber, tiles, paint, hardware and the like that caused the exponential increase. By comparison, he said, labour costs, which rose 12 percent per annum in 2006 and 2007, were quite moderate.

It's unlikely that building costs will come down this year as mega structures such as the football stadia and the Gautrain are still supporting high building prices of major companies.

However, Greeff said, among the smaller builders (including many in residential work) prices are now declining — and for first time in five years some new development entrepreneurs are now ready to offer deferred payments, discounts, initial subsidies and equipment installation allowances.

"By early 2010 it seems possible that the new building price increases will once again be on a par with those of second-hand homes.

How much cheaper?

"Right now, however, buyers are able to get an Upper Constantia home in the R6-million to R15-million bracket at R10 000 to R12 000 per m². These same homes built under current conditions could not be built at less than R16 000 to R18 000 per m².

"The message is, therefore, clear: if you can get a bond or have resources, now is the time to get in."

Greeff has already said that, although the Cape housing market could see a few further minor price declines, a bottoming out of the price graph is now becoming evident.

"The market," he said, "is already responding to the anticipated interest rate drops. Those who doubt this just do not understand how strong the desire for home ownership is among the newly empowered lower middle class and how this has a push-up effect across the board."

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