Over-commitment still a problem for many over-ambitious young homebuyers, says Greeff

Traditionally, says Mike Greeff, Chief Executive of Greeff Properties, young people who wanted to get into home ownership started in humble, low cost homes, often in unfashionable areas. They then sold them after five or six years later and moved up to something more expensive, repeating the process again several years later.

“That has been the pattern, the trend for most of my life - but in the last decade we have seen a new breed of buyer come onto the market, the type who cannot wait and “wants it all” right now.”

These ambitious ‘drivers’, says Greeff, may or may not be on high salaries, but one thing can be predicted with absolute certainty and that is that before long they find themselves over-extended financially.

By getting a maximum bond and a second bond from a relative they will then spend lavishly on improving the home and quite possibly on expensive cars and holidays for themselves and their wives.

“However, the fairly rapid rise in interest rates over the last two years,” says Greeff, “should have shown just how dangerous it is to over-commit oneself. Credit over the last four to five years (until the implementation of the NC Act) was very easy to come by but although that is no longer the case, there are many young buyers out there still over-committing themselves.”

In these situations, adds Greeff, the conscientious older and more experienced estate agent can – and should – play a restraining role if he has been given an insight to the young couple’s finances. It should also be expected that parents who have been through a downturn or two should also be doing more to restrain spendthrift offspring.

“It is always worth pointing out that homes can be upgraded later in life and that there is no shame in living in a smaller or unimproved house for a few years. Excessive debt invariably causes misery and leads to further dangerous tensions and family discord.

“All this is, of course, sounds very old-fashioned, but it is surprising how necessary advice of this kind to young buyers has become. Young people have to learn the lesson that financial peace of mind is a blessing. Let us hope that the austerity of the coming year will inculcate more responsible attitudes and lead to these upcoming ambitious types adopting a moderate approach.”

Article by: www.greeff.co.za