Edward Van Zyl
Smaller is better for first-time buyers
Size matters, as the saying goes. And, in the case of property in the current economy, first-time buyers are advised to aim for smaller and wiser rather than larger, which will become increasing less affordable.
The recent 0.5% rise in the interest rate and the strong possibility of more rises before the end of this year are definitely causes for concern, says Bill Rawson, Chairman of the Rawson Property Group, because residential property in South Africa had in 2012 already become less affordable to large sectors of the population.
Quoting the respected FNB economic analyst John Loos, Rawson said that
in the current “supply constrained” residential market prices in most
categories will continue to rise this year, probably at above 8%, while
employee remuneration growth will probably decline (to below 6%). FNB’s
price-to-average-employee remuneration index, said Rawson, as well as
their index for installment payments on a new 100% bond in relation to
average employee remuneration both fell by almost 2% in the second
quarter of last year. Since then, he said, Loos has indicated that a
slight improvement in affordability levels took place – but the
prediction now is that this situation is very unlikely to be maintained.
Aim for affordable
“The average South African’s ability to afford the home of his choice will, regrettably, almost certainly decline further this year. With interest rates on the increase, the indices quoted above will probably look even less satisfactory by the year end,” said Rawson.
In the circumstances, said Rawson, South Africans must very seriously consider lowering their targets and ambitions in order to become house owners and should do all they can to maintain this ambition rather than to be rent payers in perpetuity.
“Survey after survey,” he said, “has shown that, at the lower and
middle income groups, investing in a house is the surest way for people
to build up an asset. Unless they are extremely self-disciplined, no
other investment channel performs as satisfactorily for these income
groups as does housing.” #vanznaziestateagent