Silver Linings Property Playbook - Part 1
In the beginning of the year, 2020 was dubbed "Twenty Plenty" by stockbrokers, due to record highs in stock markets across the world. The markets have changed significantly since then, but the moniker could aptly apply to the property market as there will be a significant number of opportunities.
We will be writing a series of four articles giving investors and purchasers an insight into the changed landscape and the best way to navigate the market. This article will set the scene and the three follow up articles will give details on the best way to go about purchasing an investment property, a home, and a holiday home.
The scene
There will most certainly be an increase in the supply of properties, however, there will also be market forces that will mitigate the amount of properties reaching the market. Some of these forces include sellers delaying immigration, sellers not upgrading and fewer speculators / "part time" developers. This will mean only serious sellers with a "need" to sell will be left in the marketplace. A large proportion of these sellers will have an urgency to sell their properties. These sellers will be looking for clean quick transactions. Similarly, developers and their financiers will be seeking the comfort of seamless transactions.
At Hunt Properties we do not believe in any party "winning" a transaction. We believe in parties successfully negotiating a mutually beneficial agreement where both parties "win". Aggressive "low balling" will be unnecessary. The comfort of liquidity will be enough of an incentive for a seller with an urgent necessity to reward a purchaser with substantial subpar price.
To negotiate correctly, you need to be prepared.
- Loosen up as much cash as possible. Cash is king and the more you can put in the offer, the more comfortable you will make the seller.
- Get an indication from a financial institution what bond you would qualify for. This is the next best alternative to cash. There has not been a better time to finance a home with the interest rate at a record low of 7.75% compared to the twenty-year average of 10.5%, which equates to a saving of R1,775 per million on your bond repayments. Visit our website to access our 20-year prequalification tool powered by OOBA that allows you to check your credit score and establish what you can realistically afford in a matter of minutes.
- Confirm a budget that you would be comfortable with and work out the costs in purchasing the property. i.e. Transfer Costs, Transfer Duty, Bond Costs and disbursements. Similar to the above we have a tool that can assist with that, available under the 'Tools' tab on our website.
- Ask the agent for the offer to purchase to read through first. Ask all the questions you need to and seek legal advice if that will give you a greater degree of comfort.
In conclusion do not fall into the trap of waiting in anticipation of homes being repossessed. Firstly, there is no guarantee that there is going to be a large proportion of homes that will face closure with the government providing a large stimulus package and financial institutions having time to prepare of the economic downturn. Secondly and most importantly, good properties that will hold their value through tough economic times, grow at a quicker rate in the good times, and that provide a solid return on investment, will not make it to the auction lot. A far better strategy is to be prepared, identify the right home, and offer a solid seamless deal to the seller.