Timing the market, and knowing when to buy is notoriously difficult, and can often only be assessed by looking back. Based on my experience over the last four decades, my sense is that now may just be the right time to buy. The market looks set for an uptick, especially with the expectation of interest rate cuts in the next few months.
The banks have largely signalled that the market seems to have bottomed out, and is poised for the next upcycle. The case for rate cuts is strong with inflation largely settled, and the currency stabilised, albeit at a higher level than the ideal. The Bank of England recently cut their rate, and the US Fed is expected to follow suit with a 25bps cut in September. This should provide further impetus to the Reserve Bank to cut the rate.
We have now had no loadshedding for well over 100-days with Eskom even reporting excess electricity production. Sentiment continues to improve on the back of the GNU (Government of National Unity), and despite the many challenges, there is hope for a better future.
There are compelling reasons to buy property now, the most notable being that you are likely to find excellent value. A recent FNB House Price Index for example showed that prices edged up by just 0.5% on average by mid-year, and the trend has remained below 1% this year, well below the inflation rate. Outside of the high-demand areas, price growth has now been flat for the last two years, and many areas still sit with high stock levels, especially in the inland regions.
Slow demand is also weighing on the market with properties now taking longer to sell at 12 weeks on average compared to 10 weeks at the start of the year. This provides the opportunity for buyers to get in at a flat price, and potentially negotiate a discount, depending on the area and circumstances of the seller. Even at the top end of the market there has been little movement in the prices, and upper income buyers are able to find good value.
Buyers who hesitate and leave it until the market is on the up, will likely have to pay a higher price. If you can afford to purchase right now, you will benefit from future savings when the rate is cut. At the same time, the rate cut and boost in demand will likely see more competition which could drive up prices. Statistics show that those who have bought before a boom cycle have benefited greatly from capital value appreciation.
Mortgage lending conditions also continue to favour buyers, and while slightly tighter compared to two years’ ago, remains at the best levels in over a decade. Average deposit requirements are also still lower at around 10% depending on the risk profile of the buyer while qualifying buyers can still get a rate concession amidst stiff bank competition.
Samuel Seeff
Chairman, Seeff Property Group