Purchasing a property is the biggest financial investment of your life and you need to look after it and make good choices, says Samuel Seeff, chairman of the Seeff Property Group.
The idea is that you can take out a mortgage loan to help you pay for the purchase and as time goes by, the property accumulates in value. The longer you hold on to it, the more value it will accumulate and when you decide to resell it, you will hopefully be able to do so at a higher price compared to what you paid for it, he said.
Aside from the passage of time, the state of the economy influences supply and demand in the real estate market. In turn price growth and property values and various environmental factors affect the value of your property.
Some aspects such as taking care of your home might fall within your control, but others such as what is happening in the neighbourhood or economy are usually beyond your control.
Understanding the factors means that you can take care of your property to ensure it grows in value and at the same time have a better sense of whether it is a good time to sell if you are looking for a maximum profit.
What role does the economy play?
The property market closely tracks the economy. During an economic boom, there is usually more money around and consequently, more buyers and sales activity and prices and property values tend to rise rapidly.
When the inverse takes place, and the economy declines and there are fewer buyers and sales and price growth usually decline meaning properties are not appreciating as much in value, said Seeff.
During an economic boom, you may see property values grow by as much as 7% to 12% and even more depending on the area. During an economic decline, you are likely to see growth, which is equivalent or outpaced by inflation, meaning that in real terms, your property investment has not grown in value for that period.
The current low-to-no growth economic phase due to the Covid pandemic, has to a degree been tempered by the low-interest rate, said Seeff.
It has in sense affected the natural supply and demand working as it is boosting demand in the market, hence we are seeing a level of price growth that is contrary to what would ordinarily have resulted from the current economic climate.
Should the interest rate start climbing while the economy remains weak, buyer activity and sales will likely decline, and price growth will slow as a result.
Tiaan Pretorius, manager for Seeff Centurion added that demand and supply is a big factor.
In the popular price ranges for Centurion, there is for example still healthy demand but with equal supply, price growth remains constrained. Where there are fewer competing properties, sellers would be able to get a slightly higher value for their property.
Other factors which affect property values
Pretorius said further that the location is a prime influencer of the value. Aspects such as whether it is a middle or upper-income area or an entry-level complex or luxury lifestyle estate, whether it has views or is close to transport networks and these days, whether it has access to fibre, all factor into the value.
Schools and universities are a big priority and buyers will pay more for such a location, said Gerhard van der Linde, managing director for Seeff Pretoria East. Additionally, the size of the accommodation and land and style of the home play a role.
It is for example easier to sell a three bedroomed than a two-bedroomed home, but anything above four bedrooms will not sell for a higher value.
The condition is also a factor, he said. Buyers pay more for a well-maintained and modern home because most do not want to have to do any work on it. Sellers should remember that their property competes with other similar properties and if it is in a worse condition, it will have lower appeal.
Levies can also be a dealbreaker. The levies in some complexes make it unaffordable for buyers and sellers then have to be more accommodating with their asking prices to compensate, he said.
What might bring down a property’s value?
Neglect and poor maintenance and outdated finishes will most certainly impact the value. It will also be affected if the neighbourhood is poorly maintained or has a high crime rate.
Security has become a top priority for buyers, said Van der Linde. If you live in a neighbourhood with community safety initiatives, consider joining because, aside from a proactive role in keeping your neighbourhood safe, it also ensures property values are not negatively affected by crime.