“The recession bites us all”, chances are you’ve heard someone say this over the last few months whether it’s the news presenter on your favourite radio show or in passing at a braai.
Recently it was announced that the country is in a technical recession after the GDP has dropped to 0,7% in the second quarter of the year, following a revised 2.6% in the 1st. What may come as a surprise and a beacon of hope during the recession is it being a potential boon for buyers in the property market. Yes, you read that right!
Due to the drought in the Western Cape, vicious hailstorms in Mpumalanga and many other factors it’s easy to understand why agricultural production fell by almost 30%, dragging the GDP down. However, there’s always a silver lining.
There’s never been a better time to invest in property. The recession translates to the supply of properties outweighing the demand as unemployment increases and spending power declines. Monthly bond repayments are not met, resulting in properties being put up for sale or the banks repossessing them. Many people make the decision to sell because they’re either feeling the pinch, fear the value of the house will drop or the loan will be placed into negative equity. Negative equity applies to bond repayment structures, if the value of your home is less than the amount still owed on the bond.
Buying a house during the recession proves to be cheaper. However, it is important to note that this statement is completely dependent on the individual and the consideration of their full financial picture. New developments and other properties pricing are likely to drop between 5-10+% during the recession.
Still not sold? Even though the prices are lower right now, it is higher than what it was 10 years ago. Wouldn’t it be better to come out of a recession knowing you put your capital in a long-term safe investment where it’s most likely to grow? Given enough time, home values increase.
Interest rates will remain relatively stable over the next two years, repayments are less likely to spike. It is wise to put down a large deposit on your bond lowering monthly payments and keep the loan in positive equity. Additional funds decrease interest payments long-term and risk exposure.
Here’s the advice we can offer recession house-hunters: research, research and yes you guessed it more research.
- It’s important to have a full scope of your standing financial point.
- The upmarket suburbs are unlikely to be affected by the recession, opting for a modest property is your best bet.
- New developments are almost guaranteed to discount the properties by 5+% because building must continue and there’s no turning back.
- Take an on-the-ball approach with your research. Scope properties online to view what’s available.
- You only know what a good deal looks like when you see it – take advantage and set up house visits with the realtors
The bottom line is if buying a property is on your radar during this recession, take advantage as soon as possible. The property market works in cycles so waiting for prices to hit rock-bottom will result in a missed opportunity for investment. By the time prices crash, it’s already on the increase. More importantly, if you are not ready to buy take a step back and reconsider. You could get a great deal during this time, but financial uncertainty could only make things worse in the long run.
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This article was published in partnership with Reeflords.