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Cape Town property market starting to feel the strain

John Loos, household and property sector strategist at FNB Home Finance, says Cape Town’s property market has shown signs of deterioration after outperforming the rest of South Africa for ten years.

Cape Town property prices have slowed down especially at the very high-income level, with the slowest price growth on the Atlantic Seaboard Seaboard, while the City Bowl is slowing steadily too,” Loos said.

“Comparatively ‘affordable’ suburbs on the Cape Flats have seen major property price growth, while more affordable suburban areas to the North also hold up better, indicating a search for relatively affordable properties.”

FNB’s latest property barometer, released in May, showed that Atlantic Seaboard property prices saw annual growth of 2.5% in the first quarter of 2018, compared to 27.5% in 2016.

Loos believes that the next set of Cape Town’s property price data will reflect that the city’s property price growth has deteriorated or even depreciated.

He blames a slowing in-migration from other parts of the country into the Western Cape – due in part to exorbitant property prices – for the market’s lacklustre performance. The drought, he believes, had a lesser impact on property prices aside from negatively impacting the Western Cape economy.

“A correction was expected to happen. The Atlantic Seaboard and City Bowl showed a combined growth of over 111% the past five years, which is simply exceptional,” he says.

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Selling your Property

The decision to sell your property, your most prized possession,  seldom an easy one. People sell their properties for a variety of  reasons which include financial problems, relocating, the need to upsize or downsize into a suitable home. This can prove to be a daunting task for those who are not familiar with best practices and can lead to discomfort and stress. It is for this very reason that sellers employ the services of an estate agent. There are however, many pitfalls that sellers should be aware of. Let’s take a look at a few pointers to get you started in the right direction.

Tip #1 – Only sign a sole mandate with an Estate Agent if they offer you an excellent deal

It’s a numbers game. The more agents you have working on your property, the greater chance you have of selling it. Agents may tell you that unless you sign a sole mandate with them, that they are not willing to advertise your property. We can assure you that for every one agency that takes this stance, there are ten who don’t and will happily work with you on an open mandate basis. If you do decide on a sole mandate, limit the time period to as short as possible.

Tip #2 – Don’t try and sell privately unless you are prepared to play your part. 

Our options include sellers to “do it on their own” and not use estate agents. Although this has huge merit, remember that your primary goal is to sell your property to a qualified purchaser for the price you want. Do not lose sight of this goal ! We recommend that you use all the resources at your disposal to sell your property for the right price and in the shortest possible time frame.

Tip #3 – Finding a reputable agent

Although we encourage you to use all the resources at your disposal, it is important to find one agent who you are comfortable working with and giving them priority over the others. This agent should be mindful of your requirements and willing to make a real effort in selling your property. Make sure that the agent you decide to work with has a nice attitude and treats you with respect. You are the customer and you are doing them a favour by giving them the business.

Remember that selling your house does require participation from you and there are a few important points to remember to make sure that everything goes according to plan. Set aside viewing times during the week and weekend, when you or your agent can bring clients to view your property. Keep in mind that many people are going to be walking in and out of your home. Selling property is no easy task and if you go the estate agent route, the agent requires your support to do so.

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Buying Property in South Africa

Although the South African economy can be treacherous, with interest rates hikes and banks becoming extremely conservative with regards to whom they are willing to lend money, it remains categorically true that buying a property is the best investment you will ever make. Examining the last 20 years, we have seen a constant growth in the property market of up to 30% per annum. This outweighs the return on any investment bank account, stock or share. There is no other kind of investment in South Africa which offers that kind of return. It is also important to take note of the fact that it is a buyer’s market at the moment and there are many wonderful opportunities to seize, not only for investment purposes, but also to make your dreams come true in finding the perfect home for you and your family.

Step 1: Determine your affordability

When a bank examines your bond application, they generally work on the rule of thumb that your bond repayment should not exceed one third of your income. Many of us are not able to purchase a property if it were to depend on us alone. This is why in many instances husbands & wives, family and friends purchase a property together. Jointly, they can easily meet the bank’s income criteria. The key point to remember is that your bond repayment can vary depending on the interest rate. Calculate a worst case scenario and make sure that you will still be able to afford your monthly bond repayment.

Step 2: Go hunting for the perfect home

There are many wonderful properties on offer, especially new developments. However, regardless of the price, the home has to speak to you personally. After all, you will be living there for some time. Consider the area, proximity to your job and schools. Think about the kind of property you want, be it a townhouse or a freestanding cluster. Sometimes, we do dream and feel inclined to reach higher than we ought to. Relax; it’s perfectly fine to feel that way. Remember that we all have to start somewhere. If your heart is set on a freestanding cluster, but you can’t afford one, then consider buying am apartment and selling it a year or two later. The proceeds from doing this will certainly put in line to buy that beautiful cluster. It is definitely worth the wait! Sometimes it can be a daunting task to find that perfect property. This is when the services of a reputable estate agent are invaluable. We at MRealty assist our clients to find a perfect match and spare no expense in delivering excellent customer service. You should expect no less from any estate agent as you are making an important decision. The best advice we can give you is that when you find that perfect property and you are ready to buy – DO NOT WAIT. Properties in South Africa are sold on a first come – first served basis. If you like the property, then make an offer to purchase.

Step 3: Sign the documents

When you are ready to buy, an estate agent will assist you to make an offer to purchase. Once you have completed this document and the seller has signed it, the document then becomes a deed of sale (which is a binding contract). This document states the terms of purchase between all the parties involved and usually expires within a few days if the seller does not accept it. Make sure that the contract you are signing is from a reputable estate agent.

Step 4: Raise a mortgage bond

This step involves applying to the banks for home loan finance. Usually it is better to work with a mortgage originator to achieve the best results. They will fight on your behalf to make sure that you get the best possible interest rate. Your estate agent can usually refer you to a professional person. It is my experience that it is best to use an originator whom your estate agent is familiar with. If any problems arise, matters can be dealt with quickly which in turn results in better service for you. When buying from a property developer, they will usually insist that you make use of their in-house mortgage originators. This is a standard practice.

Step 5: Move into your new home

Once you have received a final grant from a bank and accepted it, the documents are forwarded to an attorney who is appointed by the seller or the developer. Once the attorney is ready, they will call you and make an appointment with you to sign all the required paperwork. Once this is completed, the documents are forwarded to the deeds office and the property is registered in your name. This process can take up to 8 weeks. Many sellers will allow you to take occupation of the property before it registers in your name. Should this be the case, you will be asked to pay occupational rent which is calculated between 0.8% – 1% of the purchase price.

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Buying off plan

Buying into a new development can be a risky business. Uncertain market conditions have closed the doors of many property developers who could no longer afford to continue building. This can have severe consequences for potential purchasers who stand to lose their deposit (if not worse). It is therefore wise to only buy from property developers who are financially stable and are able to show an excellent track record. That said, buying a new property is truly wonderful. You have the opportunity to choose your own finishes and become part of a select fortunate few who can call themselves new home owners. Developers are aware of the present market conditions and are using this to their advantage by offering purchasers some unbelievable offers. Lets take a moment to look at what you can do to make sure that you are buying into a dream that will actually materialise.

Tip #1 – Do your homework
It is your responsibility to find out about the developer and to make sure that they are reputable and have delivered on their promises in the past. The best way to do this is to ask your estate agent about projects the developer has completed in the past. If they have at least 5 developments under their belt, chances are that they will be able to produce the goods and you can buy with confidence. There is no substitute for peace of mind.
Tip #2 – Know what you want before you start looking
If you plan on buying a new development, it is always best to have your affairs in order before you start looking. It is important to know how much you can buy for and what kind of property you want. Developers offer amazing deals and therefore the properties sell quickly. If you wait, you will lose out. If you fall in love with a property, you should be able to make an offer on the spot. Know that if you don’t, it could be sold by the next day. Developers cannot afford to hold on to a property for you until you have made up your mind or sell your house. It has to be a quick and informed decision.

Tip #3 – Imagination is everything

When you buy into a new development there is no physical property to inspect. All you have are artistic renderings and floor plans. You have to use your imagination to envisage how your property will look once completed. If you feel uncertain, it is always best to visit previous developments which the developer has completed to get a feel for what the end result will look like. Do not be put off by a barren construction site. Let your imagination run wild !!
Tip #4 – Ask Questions
Before you make an appointment to view the development, ask your agent for all the marketing information so that when you meet, you can ask informed questions. Ask about the size of the unit, if the complex will be pet friendly and if the unit has a garage or carport.
Tip #5 – All good things come with time
Once you have bought your property, be prepared to wait. Developers can take up to 24 months to produce the finished result. This is a worst case scenario as we have seen developers deliver within 3-4 months. It all depends on the size of the development, the phase in which you have bought and the type of property which needs to be built. it is important to be sure when your home will be completed to that you can be prepared to take occupation.
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7 Things to Consider When Selling Your Home

Here is some important tips to consider when Selling Your Home

  1. Traditional Agent vs Private Sale vs Online Agent

Once you have made the decision to sell, the big question is, “How?”. Still the most popular way to sell is through well-established traditional estate agents. Amongst other things, traditional agents offer sellers a face-to-face relationship, will source and accompany buyers for property viewings, handle negotiations on the seller’s behalf and draft the sale agreement. These are all valuable services; however, you can expect to pay between 5% – 8% commission to the agent on completion of sale.

An alternative to using an agent is to do a private sale. You won’t have to pay any commission, but now the onus to find a buyer and handle the sale is squarely on you – the seller.

A third option is to use an online estate agent. In this instance your property is given extensive exposure to thousands of online buyers. An online estate agent is always on hand to offer advice, they will also arrange viewings, handle negotiations and draft the sale agreement. You will not have the face-to-face relationship that you would with a traditional agent and you may have to show your property to buyers yourself, but you will pay a significantly lower commission rate.

Proptions are the first ever Property Marketplace to offer the full range of options.

  1. Sole vs Open Mandate

If a seller chooses to work with an agent, one must also choose how many agents they want to have selling their property. Signing a sole mandate will give sole authority to one agent to sell the property whereas taking up an open mandate will allow you to use multiple agents. Be aware that signing an open mandate with a traditional agent often comes with a high commission rate.

  1. Pricing

The primary reason for a home not to sell is that it is overpriced in relation to similar homes in the same area. Over time it has been proven just how much is to be gained by correct pricing and just how easily buyer interest can be destroyed by over-pricing. If a home is overpriced, prospective buyers will generally not see this as an invitation to negotiate and are much more likely to simply exclude the property from their shortlist of viable options. A correctly priced property based on current market conditions will attract the healthy interest needed to sell your property in good time at a good price.

  1. Compliance Certificates

It is a requirement when selling your property to complete various compliance checks. As this is something that needs to be done anyway – why not do it upfront? It will be a bonus when marketing the property to tell the buyer that the home is compliant and that any problems have been fixed.

The required compliance checks vary from one area to another, but the common ones include, beetle, electrical, plumbing and gas inspections. Sellers can get quotes and decide for a tradesman to perform compliance checks by posting their requirements on Favo who the preferred online partner of Proptions. Their website is www.favo.co.za.

  1. Repairing Defects

Once you have decided that the time has come to sell your property, you will most probably find that your home has several defects. Ideally, sellers should have the home inspected before they put it on the market so that they are aware of any issues or structural defects that need to be addressed. Sellers are morally obliged to inform the estate agent marketing their property and/or the buyer, of any known defects. Once the property has been inspected and a quote obtained for any necessary repairs, sellers need to ask themselves whether they will come out better by repairing the defects or dropping their asking price. Again, you can find a tradesman to assist you in this regard via Favo – www.favo.co.za .

  1. Curb Appeal

First impressions are incredibly important, especially when it comes to selling your house. “Curb appeal” can be described as the presentation of your home from the street and how the front of you home looks or appeals to someone passing by. Stand on the road outside your house and take a long, hard look at the front of your property. Does it look clean and inviting, or dingy and unloved? Spot the problems and get to work. Remember there is nothing that will reduce your home’s curb appeal more quickly than a pile of rubbish or having unnecessary items sprawled around the house. Get rid of the black bags, garden refuse and store away the gardening equipment. Clean sparkling windows, a fresh coat of paint and neat gutters will do wonders for your home’s “curb appeal” and help you nail that first impression – get to it!

  1. Home Staging

If you want to give your property some extra sparkle to outshine the competition, consider some simple home staging techniques that can make a big difference. The most important thing you can do to prepare your home for sale is to get rid of clutter. Remove any items that do not contribute to the appeal of the house. One of the major contributors to a cluttered look is having too much furniture. Remove unnecessary furniture and the house will look much bigger for it. Ensure that all the rooms in your home have good lighting as this will make the house look warm and welcoming. To make a room appear to be bigger than it is, paint it the same colour as the adjacent room – if you have a small kitchen and dining room, a seamless look will make both rooms feel like one big space. Accessories your bedrooms to make them more inviting and clean out the closets to show off your storage space. Make sure the kitchen and bathrooms are super clean – few things are more off-putting that a dirty kitchen sink or bathroom toilet.

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All You Need to Know About Real Estate Mandates

Apart from being a rather controversial topic, estate agency mandates are often poorly understood. In general, estate agents can’t say enough good things about a sole mandate as well as how much time, effort and energy they will put into marketing if you to grant them exclusive rights to selling their property. On the contrary, I have found that many people who have signed sole mandates in the past do not share this opinion and will insist on opting instead for an open mandate, allowing number of agents to sell their property.

There are three different types of mandates, which are described below:

  1. Sole Mandate

A sole mandate gives exclusive rights to a single estate agent to market your property. On the sale of the property the agent is paid the full commission whether the agent introduced the buyer to the property or not. Sole mandates are generally valid for a period of 3-6 months. If the property hasn’t sold in that time the mandate will then be terminated or renegotiated.

Estate agents often explain that they will put in more effort and dedicate more resources to selling a property for which a sole mandate is signed. There is certainly a clear incentive to do so as there is always a chance that their efforts in selling a property on an open mandate will go unrewarded if another agent ends up making the sale.

The downside of a sole mandate is that as a seller, you are locked-in to a contract for a set period with one specific agency. If you do sign a sole mandate, I would recommend that you agree to a mandate duration of no more than 2 months.

  1. Open Mandate

An open mandate allows you as the seller to market your property with any number of real estate agents. In this instance the estate agent that finds the buyer and sells the property will receive the agreed upon commission. The other estate agents will not receive any payment.

The advantage of using an open mandate is that you can sell your property through whichever estate agent you choose and are not locked into a restrictive contract.

It is common for estate agents to offer sellers a lower commission rate for a sole mandate rather than an open mandate. This is because estate agents are willing to take a cut in commission as a trade-off for the sole rights to sell the property.

If an estate agent says to you, “I will charge a commission of 5% with a sole mandate or alternatively, I will charge a commission of 8% with an open mandate”, what would you choose? This is a common method used to entice sellers to sign a sole mandate.

  1. Multi-listing Mandate

A multi-listing mandate is signed where an estate agent sources a property and gives permission to other estate agents to sell the property. The estate agent who sources the property is known as the “listing agent”. When you sign the multi-listing mandate with the “listing agent”, your property details are sent to the other member agencies in the multi-listing group. These estate agencies then choose whether they want to try sell the property. If they are successful, the commission is split between the “listing agent” and “referral agent” who found the buyer.

A multi-listing mandate is a hybrid of the open and sole mandate. In this scenario as with an open mandate open mandate there could be any number of estate agents trying to sell your property, but this option often comes with a higher commission rate and internal politics.

  1. Our Viewpoint

At Proptions we believe we don’t have any place in telling you who you can or can’t work with to get your property sold. It is your priority to get your home sold – It is our priority to offer you the easiest and most affordable way to do it!

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