Don't be so picky on your property
One might still be able to argue that location, location and location are still the most important things to look for when buying a new home or property. But in todays climate of rapidly rising and perhaps inflated - house prices, that should not necessarily be the same as address, address, address.
Following the 24,3% rise in local house prices in May (according to the ABSA House Price Index), CEO of Realty 1 Elk, Mike Bester, says buying a home in the best area - traditionally the guiding tenet of the house hunter - is no longer practical.
Shopping for a home with that perfect address has become more a dream than a reality, he says. Right now, the most important factor is to get into the market even if it means a smaller home or a different area." Instead of buying in what are currently the most popular areas, property investors may be forced to look further afield to those areas that have potential for development in the future.
The Reserve Bank's decision last week to keep the key repo rate on hold - and hence the prime lending rate at 11,5% - is good news for existing bondholders, but it is also likely to fuel further increases in house prices, says Bester. He adds that people need to realise that house prices are not going to come down: "There are no more bargains out there, and for those who don't want to spend the rest of their lives renting, it is time for the family to sit down and work out what they can afford in monthly repayments for the next five years," he said.
As a rough guide to working out affordability, Bester said that banks tend to look at repayment figures of between 25% and 28% of a family's gross income. Bear in mind, however, that interest rates are widely expected to begin to move up later this year, and this could have a marked impact on the amount of your monthly repayments for a given size home loan. To be safe, you should still be able to repay a bond if the interest rate you are being charged increases by at least 3%.
Instead of going the rental route, Bester recommends that families to get into the discipline of fixed monthly repayments on their own property in order to create wealth and stability. Those who had been renting while waiting for the perfect home at the right price should consider re-visiting their parameters, he adds.
"People might need to consider living further away from their
place of work and absorbing the extra petrol costs as a possible answer
to finding an affordable home," he said. He recommends that prospective
homebuyers work within a circle, the outer edge of which would represent
the furthest distance they would be prepared to travel. Once this has
been established, you should also find out more about the suburb - including
prices, crime levels and infrastructure - before a final decision to
purchase is made.
Article By: Shirley Kemp - Moneyweb