News from - Chas Everitt International Property Group
There are positives in every market, says Everitt
Its time for consumers to stop focusing on the immediate problems in the real estate sector and start focusing on the bigger picture.
So says Berry Everitt, MD of the Chas Everitt International property group, who notes: Homeowners and sellers are currently preoccupied with a possible decline in prices but they need to realise that this is part of the perpetual economic cycle, in which the prices of all commodities including property - go up, go down and then go up again.
He points out that homeowners who bought their properties five years ago and held them today have an asset that is worth at least 100 percent more than they paid for it, so if they have to sell today they may not get what they would have got last year, but it is highly unlikely they will actually lose money. On the other hand, they may be able to upgrade for less than it would have cost them last year. And if they continue to hold their property, they will derive more benefits when prices start to rise again.
Meanwhile, such owners may also have had the opportunity to utilise some of the increased equity in their properties to improve their lifestyle. They may have chosen to further their education, perhaps, and got a better job as a result. Or they may have used the money to buy another property and increase their asset base. These are the sort of benefits to be derived from the upward part of the price cycle.
But rising prices are dependent on demand, and that tapers off at a certain level due to lack of affordability. To enable new buyers to enter the market and keep the economic cycle going, prices have to come down or at least level off at some point. This is where we are now, and from a sellers point of view, SA is a great place to be, because it has one of the few real estate markets in the world where there are literally millions of potential buyers champing at the bit to become homeowners.
Indeed, a recent survey conducted by Markinor for the Readers Digest shows that more than 50 percent of South Africans rank owning their own home as their most important life goal, which means that there is actually a huge market for homes that are for sale, provided they are pitched at the right price.
This is, he says, just one of the opportunities inherent in the downward phase of the economic cycle. Another is that higher interest rates at the moment are driving up the demand for rental properties and the returns to be made on those properties. This is of course bringing savvy investors back into the market and as that demand also grows, it will also help to absorb inventory and start creating the conditions for prices to start to rise once again.
Consequently, we do not believe this should be a time for scaremongering about the current state of the market, because that will keep changing. Instead it is a time to be looking at the bigger picture and finding ways to maximize the opportunities it always presents.
Article by: www.chaseveritt.com