Tenants are becoming owners as reduced interest rates open up the residential property market

Rowan Alexander, Director of Alexander Swart Property says the current, exceptionally low interest rates, are opening up the residential property market to buyers who previously did not qualify for bonds. This is particularly evident in the Northern Suburbs of Cape Town, where new developments offer good value.

As recently reported, Alexander sold 13 homes in two new developments in his operating territory of Brackenfell and Kraaifontein. Some three quarters of these were tenants who were now able to become owners. Similarly, Garth Hewitt, a top agent at Alexander Swart reported that his last nine sales were also to tenants making use of the favourable market conditions.  

"We are noticing a major swing from renting to buying as it is readily achievable under the new interest rate conditions. In January 2020 the owner of a home purchased approximately a year ago at R2.3million, would have been paying R22 000 per month on his bond (taken out at a 10% rate) for which he would have been charging R14 000 to R15 000 rent per month. To qualify for a bond of R2.3 million, he and possibly his wife, would have had to earn a combined salary of R60 000 to R70 000 per month. "It is possible for a former tenant to qualify for the same bond under the new rates, with monthly earnings of only R50 000. If he has a new 30 year bond, he would come close to paying no more than he did for rent of approximately R15 500 per month. If and when the rates do begin to rise again, I suspect it may be a year or more before it does, he will almost certainly be able to find the extra cash needed. Interest rates could even fall further in the near future."

In view of what is happening, says Alexander, those who would like to own their own homes should consult a reputable estate agent or bond originator about the level of bond they would now qualify for. They might be pleasantly surprised to find that they are now eligible for a substantially larger loan: for example the applicant who previously qualified for a R1 million bond could well find that he now qualifies for one worth R1 450 000. Furthermore, the new buyer is likely to find that some homeowners are being forced to sell their homes as a result of the appalling economic situation in which South Africans now find themselves. "It is not an exaggeration to say that the whole field of residential property has widened its parameters and there are now greatly increased opportunities."

Currently one of the noticeable trends, says Alexander, is that a fair number of people are upgrading from apartments to freestanding homes. It has become apparent that many flat dwellers yearn for slightly more floor space, a garden and a yard. Nevertheless, in the sectional title world the current swing is to smaller, more affordable one-bedroom apartments. There has been an oversupply of two-bedroom flats which will take some time for the glut to be taken up. "Now is the time to be talking to your estate agent: those who act soon will find, in a year or 18 months from now, that they made a good decision."

For further information contact Rowan Alexander on cellphone 082 581 3116 or by email: rowan@asproperty.co.za