Petrol and property costs now in the balance

Although fuel prices have come own from their mid-year highs, this week's increase (subs: Wednesday 6 Dec) indicates that prices are likely to remain in a generally higher range, and this is prompting a growing flow of homebuyers back to the inner suburbs.

"Many people feel that generally higher fuel prices and transport costs are here to stay," says Dr Piet Botha, chairman of the Nationlink estate agency group, "and are now seriously weighing up the high cost of commuting long distances to work, school and shops against the generally higher prices of homes in inner suburbs and city centres."

And for those tired of spending hours in the car every day, there is more than the fuel price in the balance, because quite apart from the cost of time lost to work, family and other commitments while driving, the total cost of commuting also includes the vehicle's fixed and running expenses, which can rapidly mount up to quite a large sum.

According to the Automobile Association's website, for example, if a vehicle with a purchase price of R100 000 travels an average of 20 000km per year, the fixed cost value will be 163c/km. If the same vehicle has an engine capacity of 1.6 and is petrol driven, it would have a running cost of 86c/km. If these two figures are added together, the total operating outlay for the vehicle will be R2,49/km - or almost R50 000 a year on top of the fuel cost.

"The cost of the time wasted of course varies from person to person but many commuters are now reckoning it is just too high at any price and this is driving a definite trend of middle-class families moving back to the older, core suburbs - in spite of the fact that property prices in these areas are often higher. They are calculating that they can afford higher home loan repayments out of what they save on commuting," says Botha.

"Areas surrounding the inner city or close to business nodes often offer an exclusive address and homes therein will sell at a related price. Knowledge Factory's SAPTG states that the current average selling price for full title homes in Johannesburg central, for example, is just under R2,5m, while that for homes in Cape Town's central suburbs is just under R4m, and that in Durban central is just under R1,6m."

The area you select will of course depend on your budget. Rosebank and Morningside in Gauteng are both close not only to major arterial routes but also to business nodes of their own. However the SAPTG reveals that the average selling prices for full title homes in these areas over the past year has been some R3,8m and R2,4m respectively.

"For families that do not have such a large budget, Bryanston and Sunninghill offer sought-after addresses and selling prices over the past year of just under R1,9m and just over R1m respectively. And Parkhurst and Fourways offer even more affordable options, with the average selling price for homes in Parkhurst being just over R1,4m and that for homes in Fourways being some R766 000."

In Cape Town, property prices in areas close to the CBD are high, so buyers looking for affordable accommodation in these suburbs are generally limited to homes that require renovation or repair, notes Botha.

"Having said this, however, homes in Cape Town are renowned for their capital growth so buyers should ask the advice of their local real estate professional as to which areas are expected to perform the best.

"Green Point and Sea Point, for example, are close to the inner city and offer easy access to major arterial routes. Once run-down areas, these suburbs have already experienced a significant facelift in terms of the numerous up-market apartment blocks that have been developed. The average selling price for a home in Green Point is just below R2,2m now and in Sea Point it is just over R1,9m, and there is still a substantial amount of rejuvenation taking place which can only be good news for investors."

In Durban, a popular established area that is central to business nodes is Durban North which encompasses a number of residential suburbs. The average selling price for a home in Durban North is just under R1,5m while in Umhlanga Rocks, which has en emerging business node of its own, the average selling price is just under R3m.

"And in the long term, investing in a home in a core suburb is likely to be a sound investment," notes Botha, "as property prices in such areas generally keep rising steadily - if not spectacularly - in all market conditions."

Article by: www.nationlinkproperty.com