Shortage of properties on sale

Gerhard Kotzé looks at how you can take advantage of the shortage of houses on the market. Property buyers, buyed by the more positive mood in the market, are finding that there is something of a stock shortage in some respects, even at this early stage of the recovery cycle.

This is due to large numbers of sellers now withdrawing their properties from the market in anticipation of receiving a higher price “down the road”.

Buyers can find ample stock, wide choice and value in recently completed sectional title and cluster developments.

While we have what amounts to something of a shortage of pre-owned freehold properties we have precisely the opposite in the case of cluster and sectional title projects where developers with long lead times were hard hit by the recent property market recession.
Whereas property supply and demand usually works in tandem across all categories, there is now a divergence which works to the advantage of buyers.

Nor is the situation likely to change in the short term, he believes in that the supply of cluster and sectional title units is likely to remain in surplus for the immediate future, despite a lack of plans passed and new building activity.
There is therefore a brief window of opportunity for buyers to acquire such properties, probably at good prices, before supply moves into general equilibrium across the board once more.

On the other hand as far as freehold properties are concerned, sellers may be over-optimistic about the likelihood of obtaining higher prices later, particularly if they make the mistake of returning to the market in say, six to nine months time, expecting to see a significant increase in the general level of prices.

The joker in the pack on this scenario is what is likely to happen to the market post-World Cup when the euphoria dies down and the country’s economy has to re-invent itself.

Then of course there is the ever-present possibility that interest rates may increase again. There are already hints in the media that the current low levels of interest rates may not last much longer as the economy recovers.

Finally of course there is the old property adage that if you sell at a particular stage of the market cycle, you will also be buying into prevailing market levels and that, all things being equal, there is no particular advantage to be had from delay.
 

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The word “home loan” or “mortgage” have exactly the same meaning. Since most of us do not have enough money to pay cash for a home, we need to apply for a home loan or mortgage from a bank to assist us with the purchase

If you found the home of your dreams and the bank grants you a home loan then your bank will pay the owner of that property. Thereafter you will have to start to making monthly repayments to pay off the debt you now have

Although the definition of a home loan is straightforward, the actual process is very detailed in nature. Here are some basics about home loans that you should know.

Home loan amortization

Amortization is a term used to describe the payment of a homeloan through a schedule of systematic payments. You will have to keep up with your monthly payments to the bank until your home loan is paid in full.

Your monthly payments are made up of principle (the original loan amount) and interest payments. A loan amortization schedule shows the allocation of each loan payment to interest and principle

Loan Term

Your loan term is the amount of time it takes you to pay off your loan. The loan term can vary from 5-30 years, although most people in South Africa, prefer a 20 year loan term.

The longer you take to pay off your loan the lower your monthly repayments will be, but at the same time the interest that you will be paying will be much higher.

Types of Mortgages

The most common ones in South Africa are the fixed, variable rate mortgage as well as, more recently, the interest only mortgage.

A fixed rate mortgage means that your repayments remain the same over a certain period. The only increase that you can expect is the result of increases in insurance rates and property taxes.

With a variable rate mortgage your monthly repayments will fluctuate. If interest rates are going down your monthly repayments will decrease, but should rates go up your payment will increase accordingly.

With an interest only mortgage you only pay off the interest on your loan and delay the repayment of the principle debt. However, you will have to settle the debt eventually by either restructuring your payments or by selling your home.

Financial Calculators
If you are comparing either a fixed, variable or interest only mortgage home loan, then you could use one of our financial calculators to help you decide.

You should now have a much better understanding of what a home loan or alternatively a mortgage is.

For a more detailed discussion on various subjects you can call us on (011)327-4489 or go to www.mortgagepluscc.co.za