Real Estate Investor Magazine South Africa December 14/ January 15 | Page 25

REI RESIDENTIAL
REI Residential

Expert Q&A

Homes more affordable now than
at any time in the last 10 years

F

NB’s Estate Agent Survey reports 22% of agents experiencing stock constraints
– an exponential increase from zero during 2009. The cost gap or difference
between the replacement cost (or new build) and the existing stock of homes,
expressed as a percentage of the existing stock, is currently 22.9%. This means
that on average it is 22.9% cheaper to buy existing homes rather than new.
According to Andreas Wassenaar, MD of Seeff Dolphin Coast and Seeff KZN
Chairperson, “This is part of the property market cycle where we do not expect
too much speculative buying. As a value investor I am always looking for the
times where I do not have to compete with speculators, and this is what I am
finding now.”
The amount of square metres of newly completed residential homes is well
below the long-term trend line, which tells me that the stock shortage will not go
away in the near term. We can therefore expect rental demand to exceed supply
for a while. This is good news for buy-to-let property investors.
In terms of affordability, the average-priced home repayment value on a 100%
bond relative to average labour remuneration in the economy and, more simply,
the average-priced home relative to average labour remuneration. As house
prices decline or average earnings increase, these measures will decrease and
homes are seen to be more affordable. This is exactly what has happened since
2008. Dramatic declines (or improvements) in these ratios tell us that homes are
more affordable now than at any time in the past 10 years.
Wassenaar believes that the timing is currently spot-on for buying property.
“The current market provides excellent buying opportunities in a relatively low
interest rate environment, and with financial institutions providing mortgage
finance more readily today than at any time over the past seven years. My
recommendation is to take advantage and buy now.”
Steven Barker
Head of Home Loans
Standard Bank
Many buyers struggle to decide whether to purchase a
newly built home or rather invest in an existing home. The
key is to find a home that has everything you need for the
right price. Newly built homes may be constructed to more
energy efficient capabilities. However, existing homes may
require minor ‘touch-ups’ or large renovations. Benefits
of buying an existing property include the ability to see
defects and the ability to assess the neighbourhood.
Rhys Dyer
CEO
ooba
A few key statistics from our October 2014 oobarometer
House Price Index point towards a trend of ongoing growth.
These include the continued rise in property purchase
prices, higher bank approval rates, higher approved bond
sizes, lower deposits and improved bank pricing.
www.reimag.co.za

Samuel Seeff
Chairman
Seeff
Q As we head into the new year,
what does 2015 have in store for
sellers?

Heading towards 2015, sellers can expect the
buoyancy to continue with buyers aplenty and
good prices, despite the subdued economic
outlook predicted.
Q What does this mean for the
property market?

The market is on solid ground with good balance
between demand and supply, tilting somewhat
up on the demand side, in favour of sellers on
the back of almost country-wide stock shortages.
The buoyancy in the sectional title market in the
high density urban areas has seen developers
coming back, while the high rental demand and
recovery in tourism, has boosted the buy-to-let
market.
Pre-2013, buyers were holding back, waiting
and watching house prices. By early last year,
prices had settled and, realising that if they
were going to buy smart, the time was right,
buyer urgency gathered momentum. Not even
the 75-basi ́