MOVE to enter the property market

Category Investing

Make a sensible investment into your future by entering the property market as soon as you can.

Experts agree that an investment in property is a sure way of building financial security and that it is important to get into the property market as soon as possible. Werner Scheffer, Customer Relations Manager at MSP, confirms this notion: “The best time to buy property is indeed now. The rate at which properties grow in value over time has historically surpassed the rate at which salaries grow. I believe this gap will continue to get bigger.”

Property prices vs salaries

Werner put some interesting stats together. In 1966, the average price for a house in South Africa was R9 516. In 2011, the average was just over R1 million. Property prices over this term have grown at an average rate of 11,25% per year. Werner explains: “If this trend continues until 2050, the average house in South Africa will cost R73.2 million. Using MSP’s bond calculator, you will find that a monthly bond installment of R730 000 on a loan of R73.2 million (calculated at 10,5% over 20 years) becomes very expensive and you would need to earn a salary of around R2,4m per month to qualify for this loan!

“Salaries annually increase in line with the inflation rate, which currently sits at 5,4%. If you compare the growth in property prices of 11,25% per annum with the current inflation rate of 5,4%, it is clear that property will become unaffordable to many consumers who hesitate to enter the property market timeously,” says Werner.

The Western Cape’s soaring property prices

FNB recently released its Property Barometer for the first quarter of 2017. The average growth in house prices for the City of Cape Town trends at around 14.1% year-on- year. As in any greater area, certain suburbs will attract higher growth than others, but very often these suburbs are not immediately accessible for the first-time buyer, but there are numerous other areas which are doing exceptionally good and may very well be in your budget, without you even realising it.

Value for first-time buyers

Werner continues: “The message is simple. Get a foot in the door in the property market as soon as you can. Cape Town’s Northern Suburbs (Durbanville, Kraaifontein and Brackenfell) have shown very healthy growth to the tune of 10,1% in the first quarter of 2017. This goes to show that first time buyers can still find fair property value in the greater Cape Town area and MSP is developing good value for money homes in Cape Town’s Northern Suburbs.

“First time buyers may not be able to afford their dream home from day one. However, you can buy a property to rent out. The property will continue to increase in value. When you are ready to sell and upgrade in a few years’ time, you would have built up equity (the difference between the initial purchase price and the current value of your property), which will enable you to buy a more expensive property – perhaps even your dream home.

“Property ownership puts home buyers in a position of strength. By paying a mortgage bond every month, you are contributing towards a valuable investment that will help you secure your financial future. Aim to pay off your property investment by the time you are ready to retire so that you don’t have to spend your retirement income on paying rent,” concludes Werner.

For more information, get in touch with MSP’s Customer Care.

Author: Multi Spectrum Property

Submitted 07 Jul 17 / Views 2119