I want to ask you a question: if a 200 square-metre four-bedroomed home with two bathrooms, a double garage and a pool is worth R1 million, what is an eight-bedroom, four-bathroom, four-garage house with a pool and a tennis court worth?
Double, the same or 50 percent more? What do you think?
It is curious that the current market for reasonably priced properties is actually very active and people are getting bonds fairly easily.
I have already said that buying a flat or less expensive townhouse is, with today’s low interest rates, probably going to cost you about the same as renting.
But also interesting is that all those really luxury homes that sold for R5 million plus are coming back on the market and their asking prices are dropping, dropping, dropping.
Why do you think this is so?
Well, most of them were bought by the big guys who got big incomes and salaries but did not give value for money.
Now that we are in lockdown, many businesses are streamlining.
Government tenders are no longer the money pits that they were and people offering tenders have to give value for money – ie normal profit margins.
There is just no market for these high-priced homes.
If you think about it, a R5 million home will cost you around R40 000 per month for the bond.
You will need to pay another R3 000 for rates and taxes, plus the upkeep, staff to do the work and levies if it is in a complex or home owners association like Woodlands.
It could be close to R50 000 per month.
The reason that there are so few buyers for these houses is multifold.
Many people who could buy these expensive properties already have a home that they are happy with – why would they move?
Others who could buy may just not be prepared to take the risk – others think the price will go down another 25 percent so they will just hold out until they do.
The biggest problem may be that many people who could buy just don’t need such big houses.
I still live in the same house I bought in 1975.
It is just me and the wife – why would I need such a big house even if I was prepared to pay that amount?
Lastly it is about affordability.
To buy a house costing you R50 000 per month you will need to be earning at least R200 000 per month.
I can tell you that only maybe one percent or less of the people in Bloemfontein earn that sort of money.
Most of these super-expensive homes were bought by people who thought they were rich, but when the s**t hits the fan, they simply cannot afford them.
- Mike Spencer is the founder and owner of Platinum Global. He is also a professional associated property valuer and consultant with work across the country as well as Eastern Europe and Australia.