Is the 'sweet spot' for home buying now upon us?
Astute investors know that the basic premise of sound investment is the timing and pricing of the item purchased. In real estate, another basic consideration is location.
Good property investment is all about buying at the right time... and at the right price. That's the secret. The residential property market has almost certainly hit rock bottom in the current market down-cycle. All indications are that the South African residential property market is at last poised for an uptrend. Is it at, or close to, the 'sweet spot' for delivering good returns on investment to buyers who transact now - or soon?
Astute investors are aware of this. They know that, by the time Cyril Ramaphosa is more firmly settled in the Presidential saddle and as head of the ruling party consumer confidence will increase and the property market will improve. It always has done so on the back of positive consumer confidence. I bought my first house in the 80s for R83 000 in Parkhurst and sold 10 years later for R440 000. Look at where prices are now in that area.
An example I am aware of is a home in one of Johannesburg's northern suburbs which was well-bought at around R2,5-million a couple of years ago, and renovated, has now changed hands at R6-million-plus.
Conversely, a similar home (in the same suburb) that was seemingly badly bought at a slightly inflated price at over R3m (admittedly the market was at a slightly higher level), and subsequently upgraded, is not going to achieve a profit.
It's all in the buying. A good investment is only a good investment if it was bought well - and at the right time.
The reality is that, if you buy a property when you feel that the market has turned, you could well have missed the bottom of the market by four to six months. This could cost a good few percentage points in terms of the benefit reaped!
Wait-and-see buyers are already starting to step out of the shadows to capitalise on the growing expectation of an improvement in market sentiment after the election.
It may well herald the start of a positive process that could be perfectly poised to gather momentum.
When it comes to investment in general - and in the homes market in particular - the timing of the buy process is all-important. If your offer to buy is well timed, the chances of benefiting from growth are so much better.
Conversely, if your purchase is badly timed, you may well achieve the same growth - but almost certainly not the same financial benefit.
Optimum buying time
If you are a gambling person, you will ask yourself this question: "What are the odds of the market dropping further over the next few months, or remaining unchanged?"
"If you believe that more falls are unlikely, it cannot be all that risky to take a dip now on the likelihood of a positive post-election up-cycle.
Author: Ronald Ennik