4 external factors that impact on property sales

4 external factors that impact on property sales

4 external factors that impact on property sales

 

There are few investments that can have as much of an impact on a person’s financial well-being as purchasing a property. Not only can it affect the buyer’s current financial standing, but their long-term financial prospects as well.

 Property Auctions In Cape Town, Western Cape. Get a full list of new repo houses on auctions in Western Cape.Wherever possible, Goslett says buyers should do their research and make sure that they are as well informed as possible before they take the final steps toward becoming a homeowner.

This is according to Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, who says this is why it is so important for people to take their time when making the decision to purchase a property and to consider all aspects that could have an impact on that decision.

“For the majority of the population, buying a home will be the largest financial purchase that they will ever make, and the property itself is likely to be their largest asset,” says Goslett.

“Owning a property is considered by many as a measure of success. In fact, many place more value on owning a home than any other type of investment.”

However, he says there are a number of factors that should be carefully considered before a consumer can realise their dream of becoming a homeowner.

“These aspects are often out of the consumer’s control, but will have a bearing on the property market and should influence the decision to purchase a property,” says Goslett.

He says all potential home buyers should make themselves aware of these factors before they set out on their journey to buy a home.

“It is important to look into these influences as they can change the market dynamics and the environment in which would-be homeowners find themselves,” says Goslett.

“Understanding how these factors control or change the property market will help to empower potential property buyers with the knowledge to assess the changes they need to make in order to make a sound property purchase decision.”

He discusses a few of the external influences that could impact the property market:

1. Economic factors

Potential buyers have started to prepare for homeownership by saving up for deposits and reducing their debt levels, says Goslett.

Issues such as rising electricity tariffs, the price of petrol and the rate of unemployment will all have a bearing on the housing market.

This is because these economic factors place pressure on the population and their affordability ratios. Needless to say, if the country’s economy is struggling or experiencing negative trends, it will impact on consumers and their ability to afford a property purchase.

The state of the greater economy will directly impact the state of the housing sector. An increase in living costs will likely result in fewer consumers being able to show the necessary affordability levels to qualify for home loan finance.

2. Access to home loan finance

Before the global recession impacted South Africa, the National Credit Act (NCA) was introduced to nullify the effects to the economy as much as possible. While the NCA did have the desired effect, it also brought about much tighter qualifying criteria for home loan applicants.

As a result the bond approval rate decreased from around 80% to below the 50% mark. This in turn resulted in the lowest level of property transactions experienced in the last decade occurring during 2009 as fewer buyers had access to home loan finance, therefore fewer were able to purchase property.

While criteria for bond approval have remained relatively stringent, the approval rate has improved as banks have increased their appetite for risk and more consumers are making the necessary financial provisions to meet the lending requirements of the banks.

Potential buyers have started to prepare for homeownership by saving up for deposits and reducing their debt levels.

3. The interest rate

“Although buyers cannot control external factors, it is important that they take them into account when making their property buying decision,” says Goslett.

Most consumers who purchase a home are reliant on the bank to finance the deal, and as result they are heavily affected by the rise or fall of the prime interest rate.

Even if the home buyer opts to link their bond to a fixed rate, the rate they are given is still influenced by the prime rate.

If the rate is considered by consumers to be on the low side, they are generally more inclined to enter the property market, whereas higher rates would have potential buyers thinking carefully before making an investment.

An increase of 1% in the prime interest rate will result in a monthly bond repayment increase of R657.76 per million. Increases in the interest rate generally slow the market and affect buyer’s affordability levels.

4. Legalisation

With the introduction of the NCA a prime example, legislative changes can have a massive impact on the property market and how business is concluded.

Over the past few years there have been several legislative changes that have influenced the property market, such as the Credit Amnesty Bill

Legislative changes to the real estate agent qualifications also had an impact on the market, with buyers and sellers now more assured that they are working with a qualified industry professional.

“Although buyers cannot control external factors, it is important that they take them into account when making their property buying decision,” says Goslett.

“Wherever possible, buyers should do their research and make sure that they are as well informed as possible before they take the final steps toward becoming a homeowner.”

Source – Private Property