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    Home»Property»Expensive property prices likely to fall in 2021 and cheapies could get more dear
    Property

    Expensive property prices likely to fall in 2021 and cheapies could get more dear

    The Free StaterBy The Free StaterJanuary 8, 2021No Comments4 Mins Read
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    We could witness interesting trends in property prices this year where expensive property prices could fall significantly due to low demand while cheaper property could become more pricey as it will be more sought after.

    Sounds confusing or not making sense?

    By expensive, I mean properties worth over R2.5-million. This is for both houses and townhouse type properties.

    In my opinion this market has been oversold and over blown for many years.

    Just looking at general incomes in Bloemfontein will show that the number of people who can afford these super-expensive properties is very limited, far fewer than the number of properties being put onto the market at these inflated prices.

    If we take a R3-million property, that would mean a bond payment of around R25 000 per month; plus say, R2 000 for rates and taxes and maybe another R2 000 for insurance and some maintenance. That makes it a total of R29 000 per month.

    It doesn’t matter whether you pay cash or not because if you do you should have earned similar amounts to have accumulated the cash to buy with.

    Bonds are given based on net income after deducting normal living expenses, tax, car payments, food, school fees, etc.

    Traditionally, you could afford to pay a bond of 35 percent of your income or in this case an income in the region of R83 000 per month.

    Now I don’t know about you, but even today a family income of R83 000 per month is high by anyone’s standards.

    With the lockdown, we are told that incomes have dropped and that many people have lost their jobs.

    Personally, I believe that less than 10 percent of all those that are employed in Bloemfontein are receiving salaries or incomes at that level or above.

    What do you think?

    And despite this, the prices of more than half the properties coming onto the market are selling for R2.5-million or more.

    I would suggest that many people in this market already own a home and are cautious of moving within town at the moment.

    Only those people who are moving from another centre are likely to be buyers for this price range currently.

    Thus this market has lots of sellers, but relatively few buyers. 

    On the other hand the affordable market has remained very strong throughout the year.

    The main reason is that with the current low interest rates the cost of buying your own property is very similar to the cost of renting.

    Renting a R5 000 per month property could well turn out to be the same cost as buying a R500 000 house.

    You will pay about R3 600 per month towards your bond, R1 000 for the levy and about R400 for the rates and taxes.

    As tenants are seriously looking at buying instead of renting, demand for affordable houses could significantly increase.

    As a result of this, I see prices in this bracket trending upwards.

    Willow Glen bachelor flats are very popular and with good rentals being obtained their previous selling price of around R260 000 in March 2020 can be said to have risen closer to R300 000 today.

    On top of this, it is important to remember that some 40 000 students have not been going to varsity.

    When they come back, starting next month, any vacancy will be taken up and there will be pressure on rentals for affordable units.

    If the demand for rentals increases, it could mean a possible increase in prices at the same time.

    • 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.

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