Determining the property asking price

When putting a house on the market, there are many factors that play a role in determining the asking price for the property.

Both buyers and sellers should be aware of the factors that influence real estate marketability as they ultimately determine the value of property, says Real Estate Experts in South Africa.

Some of these factors include those of demographic change, progression and regression, and supply and demand.

Estate Agents says an important factor that determines price is the demographic change within a neighbourhood, be it negative or positive.

All areas experience transformation, either in the form of growth or decay and these circumstances will severely affect the value of a property when the time comes to sell.

Extreme examples of these are suburbs such as Hillbrow and surrounds.

They say in circumstances where the demand for property far exceeds the amount that is available in the market place, the price of homes and rentals usually increases as people are willing to purchase at a higher price rather than risk no purchase at all.

The strong demand for property leads to the building of more housing developments and accelerated growth in supply of property such as South Africa had from 2005 to 2008.

However, this often results in a surplus of housing, which causes the reverse effect in the market, especially when the market is affected by unavailability of loans, high debt levels, and unemployment.

“In the current market, this reverse scenario is in effect with the supply of property surpassing the demand for it.”

Unfortunately, with such steep growth and frenzied buying driving prices sky-high, most sellers who are now trying to off-load in the current market cannot realise the same price that they paid for their properties if they purchased in the period between 2007 until now.

This “buyer’s market” offers great opportunities for potential buyers” states Mr Prinsloo.

Houses within a neighbourhood that all conform with each other as they are of a similar size and style with the same number of rooms, for example, will all fall within a similar price bracket and the maximum value for these properties will be obtained.

The values of properties that do not conform within the parameters of the houses in the areas surrounding them may be affected by the principles of progression and regression.

The term “Principle of Regression” is used to refer to property of high value that due to its location within an area of lower valued properties is negatively affected and may suffer, as its true value is not perceived.

Similarly, the “Principle of Progression” refers to the increase in value of lower-valued properties, which are in close proximity to houses of higher value.

In short, it means that the properties around you have a negative or a positive effect on the value/price on your property, he says.

“It’s all about location, location, location and it is best to buy the worst house in a good neighbourhood at a higher price than the best house in a bad neighbour at a lower price.”

He adds that one has to think about the future of their investment and make the decision that will be best as a homeowner in the long-run.

Homeowners and would-be buyers can get an online property valuation report, which will show actual sold prices of other similar properties in a suburb, street or complex. This provides a useful guide in determining the market value of a particular property at any point in time.

If you would like to speak to a Professional Mortgage Specialist about your lending requirements, please phone Mortgage Plus Bond Originators on:

Complete this short form online

011.327.4489 / 0861 1111 93

morne@mortgagepluscc.co.za

www.mortgagepluscc.co.za

How much home loan is right for you?

One of the biggest attractions of an investment in property is the fact that it is relatively easy to gear the purchase – that is, to use someone ease’s money to cover most of the purchase cost.

Lenders are happy because their loans are secured by bricks and mortar assets and, for the borrower, there is always the chance of a quick gain from rising property prices.

Consequently, borrowers are often tempted to go for the highest possible gearing ratio, with a low deposit and a high proportion of the property cost borrowed.

“But borrowers need to consider that a bigger deposit generally means a better chance of a home loan at the most favorable interest rate, and that the loan can be paid off or at least reduced more quickly – which means that the property owner will have a bigger capital gain when the time comes to sell.”

Before they go house hunting, potential buyers also need to determine what size loan they themselves feel comfortable about repaying.

“Financial institutions will determine the maximum they are prepared to lend based on the borrower’s credit record and current income and debt commitments, and with interest rates currently so low, borrowers may well find that they qualify for bigger loans than they anticipated.

“This does not necessarily mean, however, that they should immediately opt for a more expensive property or a higher gearing ratio. Determining what size loan is right for you remains a personal decision and should take into account your overall investment strategy as well as the property in question.”

The buyer of a newly built property, for example, may need less cash to cover transfer costs or improvements and be able to put down a bigger deposit, while the buyer of an older home may decide to take a bigger loan and keep some cash in hand to cover the costs of repairs and renovation.

“In general, though, it is good advice to put down the biggest possible deposit and keep the amount borrowed to the lowest level.

“And the final decision should only be made after careful consideration of the probable future trend of interest rates and after shopping around to ensure the best possible current rate on the loan.”

Here’s some calculators to help you make the right decision:

Affordability Calculator

Bond Status Calculator

Increased Installments Calculator

Minimum Income Calculator

Monthly Payments Calculator

Please contact us if you require any further information or would like to apply for finance:

Complete this short form online

011.327.4489 / 0861 1111 93

morne@mortgagepluscc.co.za

www.mortgagepluscc.co.za