Logic in buying a new home rather than a used one

It may surprise many who are not familiar with the South African property scene to learn that 70% of property investors and some 25% of buyers actually planning to occupy the homes they own still prefer a newly built home rather than one which is ‘second-hand’ (i.e. has already been lived in), says Bill Rawson, Chairman of Rawson Properties and their associate development company, Rawson Developments.

“This,” said Rawson, “may seem illogical at a time when second-hand homes can be bought at 10% to 25% lower than new units, but in reality it makes a great deal of sense.”

Those buying homes that have already had two or three owners, said Rawson, often have to undertake a major refurbishment. If they own only one or two units in a block and they spend time and money on upgrading them, it is still possible that other units in the block, the building itself and/or its landscape will need improvement which is not in their power to bring about.

By contrast, said Rawson, if all the units in the complex are new, confidence will always be at a high level among buyers and tenants will be prepared to pay more.

“Time and again experience has shown that tenants genuinely prefer to be the first into a unit,” he said. “In addition, the buyer buying a new unit now knows that in today’s market virtually every developer is cutting his margins to the bone and the prices therefore are very competitive and that he will not be paying the full price for 18 or 24 months, i.e. when he finally takes transfer of the completed unit.

“The buyer is, therefore, effectively pegging his price at today’s price levels for the foreseeable future and will almost certainly benefit from the escalation that will take place in the interim period. He will also benefit from not having to pay transfer fees (on average 5% of the total) as new developments are not liable for this form of taxation.”

Rawson recently revealed that 90% of the purchasers in Rawson Properties’ three most recent Rondebosch developments are buy-to-rent investors - and, he said, this is perfectly understandable because the rents per metre square that they can charge are far higher in a new unit than an old one.

Rawson said, too, (as he has done on previous occasions) that if the buyer is buying for himself he should factor in the pleasure he gets from being in a new home, especially if it is in an area that suits him and his family.

Agents working on behalf of buyers, added Rawson, can for this reason have difficulty estimating the ‘real value’ of the home because if it is ideal for the buyer he should be prepared to pay slightly above the market value. Any home bought that will be occupied for five years or longer is certain to prove a sound investment.

“It is the quick in-and-out speculators who could be disappointed in today’s market,” he said. “As always, the long term operators are on a good wicket.”

Article by: www.rawsonproperties.com