You've got nine months to cash in

If it’s your aim to purchase property at the bottom of the market while prices are at their lowest, then you’d better buy within the next nine months.

That’s the advice of Lew Geffen, chairman of Sotheby’s International Realty in SA, who says all the signs are that prices will start to move upwards again at this time next year.

Reacting to the latest building plan statistics, he says these indicate that the market is currently at its lowest ebb. The figures show that the total value of residential building plans passed in January and February this year was 47,5% lower than the value of plans passed in the same months of 2008 – and that the value of plans passed for new flats and townhouses actually dropped by 66,5%.

“What this means is that most developers have no confidence in the market at the moment, and are not willing to commit to any new projects. This is a natural consequence of the severe fall off in sales over the past year and the result will be that very little new stock will be brought to market in the next 12 to 18 months.”

However, he says, the figures do not reflect the tremendous demand backlog that is building up currently because keen buyers cannot get access to credit. “Interest rates are already down by 3,5% which will really impact in nine months and a further 1% that is anticipated will put us back to before the property downturn. This coupled with the banks’ lending policies lightening up will bring positive change to the market, and then there will be a surge of buying that quickly mops up the existing stock in the market and, in the absence of a supply of new stock, starts to drive prices up again.

“But at that stage the developers will be behind the game for at least a year and the demand/ supply imbalance will cause prices to keep rising. This is a cycle that repeats itself every decade, and those who want to buy at the best time in order to maximize their real estate returns should take note.”

Furthermore, says Geffen, those who are in a position to buy now should opt for pre-owned properties rather than newly-built units. “Thanks to the high building cost

increases over the past few years, recently completed new homes are quite a bit more expensive than pre-owned homes on a metre for metre basis, and there is hardly room for negotiation.

“So if you look past all the shiny purchase incentives that developers are currently offering buyers, pre-owned homes are still better value for money. What is more, they offer a greater margin for profit when the market turns.”

Article by: www.sothebysrealty.co.za