Everyone buying a home would like to know that they are getting good value for money. Buying a property that is good value for money is not easy but is achievable for those who are astute and are willing to be patient and remove as much emotion from the decision as possible.

The first important mindset shift is that buyers must not confuse value with price. “Just because you were able to negotiate a reduction in the asking price does not make it a bargain. The price likely was inflated to begin with, because there are many incentives favouring higher listing prices,” says Renier Kriek, Managing Director of Sentinel Homes.
​
True bargains have some distinguishing characteristics to look out for. 

This includes:

• Motivated sellers

Sellers who are amid life-changing circumstances such as divorce, have fallen behind on their mortgage payments or have tenants who they are unable to evict will be more likely accept a lower offer. Often, but not always, motivated sellers’ properties end up on auction. Bargain hunters may also visit dedicated online portals like MyRoof.co.za or find court notices for foreclosure or sheriff’s actions as a source for good value propositions.

• Fixer Uppers

The market tends to devalue properties by more than the cost it will require to fix them up. It is likely that a property with R200,000 worth of arrear maintenance will be in the market for R1 million, but once you have done all the maintenance the value of the property shoots up to R1.5 million. This means the value gained by the maintenance is often more than the cost of the maintenance itself.

• Large plots

The average size of plots has been decreasing over time. The trend in urban areas is to densify and this is encouraged by municipalities. In a city like Cape Town, it is now possible to build up to three dwellings on a single residential 1 zoned plot. One must always consider other issues such as rezoning and urban development rules and this may require consultation with a town-planning expert. If the size of the plot is larger than the average new development in the area, there is likely to be surplus value. Unless the property is marketed as a development opportunity, which likely signals that the price has already been inflated to account for the size aspect.

• Vacant properties

Generally, vacant houses and flats sell for less than the ones that are occupied. This is mainly because a small crack or a spot on a carpet is more visible, than properties that are inhabited.  If you are able to visualise the potential, it is a good buy. 

• Gentrification

This is where the character of an urban area is changed when, for instance, artists or young professionals start flocking to the area. More art galleries and coffee shops start opening. “This is a reliable indication that the area is gentrifying. If you move quick enough you will be able to find a bargain that will increase in value rather quickly compared to similarly priced properties in other areas,” says Kriek.

• Relative value

When entering the market, it is a good strategy to consider buying the smaller or cheaper property in a particular area. The barrier to entry for these properties is generally lower than for the rest of the area which means demand for them is higher. Higher demand translates into quicker price growth.

Home seekers on the lookout for a bargain must remain alive to illegal construction. “The risk associated with illegal building work is almost always not worth the discount on the price,” says Kriek. If there are any doubts about the structural integrity of a building, call in the professionals to do an inspection. The benefit of a qualified home inspector, especially to inexperienced buyers, cannot be overstated. Since kitchens and bathrooms are the most expensive parts of any residential properties carefully consider the conditions of these two areas.

More sage advice from Kriek is to avoid bargains close to open public spaces. These areas tend to devalue property if they are not well maintained by local authorities. 

ENDS

MEDIA CONTACT: Rosa-Mari Le Roux, rosa-mari@atthatpoint.co.za, 060 995 6277, www.atthatpoint.co.za 
For more information on Sentinel Homes please visit:
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Overregulation of the housing market in South Africa is discouraging the private sector from investing in formal low-cost housing projects.
 
This is according to Renier Kriek, Managing Director at Sentinel Homes. "With government resources being limited and corruption widespread, it is imperative that private capital is enticed to join the constitutional project of granting all South Africans access to adequate housing," he says.
 
It is apparent that, for all the government's initiatives, programmes and subsidies to provide RDP housing, a vast number of underprivileged citizens still reside in informal settlements.
 
However, while tax breaks exist for new or improved rental housing, with added incentives for low-cost housing, the rest of the legal and policy landscape is much less persuasive to investors.
 
Mortgage risk
For one, housing consumers who earn less than R15,000.00 per month make up less than 0.6 percent in value and 1.7 percent in number of accounts granted mortgages in Q1 2023, matching a decade long trend. This is because banks tend to avoid these riskier applicants, even when supported by the government's Finance-Linked Subsidy Programme (FLISP).
 
The reason is simple: the excessively long and inefficient foreclosure process in South Africa seems bent on ensuring losses for both banks and defaulting consumers.
 
In addition, judges are often overly sympathetic to defaulting debtors per case, not considering the overall negative effect this has on banks' attitude towards financing the larger underprivileged community.
 
"However, if the cost of terminating defaulting mortgages were low, banks would be less risk averse, thereby increasing the likelihood of access by this segment," says Kriek.
 
Rental risk
Similar to mortgages, the time and financial costs of eviction are too high, and the law and courts too lenient on defaulting renters.
 
With the supply of formal housing being so low, the cost of eviction should also be low and the rights of a large number of potential tenants should weigh more heavily than those of a few non-paying tenants.
 
"If the risk was low, more landlords would emerge to invest in satisfying the obvious demand for affordable accommodation," says Kriek.
 
Development rules
Lastly, housing development in South Africa is inhibited by long or delayed regulatory processes, as well as building standards designed around first-world circumstances. This is further exacerbated by municipal inefficiency, which affects delivery of essential services like roads, water, power and sanitation.
 
Authorities have also suddenly become deeply concerned with the lack of affordable housing. Their response has been to request that developers include affordable housing units in new developments, even in areas not marked for such housing.
 
"While laudable at first glance, this does not increase the availability of affordable housing as beneficiaries will often flip the unit at market price to realise a profit," says Kriek.
 
The positive intent is therefore negated and leaves the market worse off.
 
Change Is Needed
Mortgage risk, rental risk and misguided development rules, taken together, disincentivise the development of low-cost housing in favour of larger, pricier units.
 
"Given the state of the country’s housing market, urgent legal reforms and business-friendly policies are needed to ensure all South Africans gain access to constitutionally mandated housing," says Kriek.
 
ENDS
 
MEDIA CONTACT: Rosa-Mari Le Roux, rosa-mari@atthatpoint.co.za, 060 995 6277, www.atthatpoint.co.za 
 
For more information on Sentinel Homes please visit:
Website: www.sentinelhomes.co.za
Facebook: Sentinel Home

Homes farther out, and more reasonably priced. This is increasingly what South African property buyers are looking for. “There are multiple reasons contributing to this trend,” explains Renier Kriek, CEO of home financing company Sentinel Homes.  
 
"Rising interest rates and the resulting decline in transaction volume are significant factors.
The increased proportion of ‘motivated sellers,’ selling because they are in a rising costs squeeze, are now likely to stabilise price growth until the rate hiking cycle eases off or starts to reverse.” 
 
According to Kriek, the consequences of the Covid-19 pandemic are also still very visible. “Office vacancy rates have increased, resulting in consumers no longer being as motivated by office proximity when selecting homes. This means they can search for value in outlying areas. Many even semigrate to other parts of the country. We also expect to see a rising level of commercial to residential conversions in urban areas.
 
Semigration and its cousin convenience
Kriek names the current hottest markets and sites for real estate investment as the coastal regions from the West Coast to Cape Town and Mossel Bay.
 
“The Mother City remains very popular despite high prices and strained infrastructure,” he says. “This thanks to their loadshedding buffer due to the City’s generation projects and other electricity initiatives, as well as the city’s lifestyle benefits.”
 
He claims that the Garden Route and George Airport’s close proximity make this popular tourist destination just as convenient as Cape Town.
 
“But it must be highlighted that the affordability benefit there is quickly waning because this area has become a focus for immigrants from both inside and outside the Western Cape.”
 
Finally, the West Coast (north of Cape Town) is also seeing a rise in the real estate market, thanks to its charming tiny fishing villages and rural communities like Langebaan, St Helena Bay and Paternoster.
 
“Consumers who work from home are discovering the real value in pricing that was previously only influenced by variables connected to the regional fishing and farming industry. Due to external demand for property, it is now unbound. On the other hand, gentrification problems may result from this and increasingly poor access to housing for families in the bottom half of the income spectrum is a real threat.”
 
Kriek says those still buying property in the economic hub of Gauteng, are shying away from freehold properties, such as single houses on larger plots in unguarded neighborhoods. “They prefer estates and sectional schemes. This is likely a search for safety and services,” he elaborates.
 
 Those entering the Gauteng property market will likely find the best long-term investment to be inside a security estate or secured sectional title scheme. Owners of freehold properties in more traditional suburbs may consider cashing out and moving with the trend in the interest of their longer-term financial well-being.”
 
Challenges for First Time Buyers
Kriek says that first-time buyers - who make up a very large proportion of purchasers - are moving into the property market much later. This trend is continuing to intensify.
 
The lack of affordable housing supply and inefficient housing finance market in the affordable or gap housing market, specifically properties priced under R750 000, contributes significantly to this trend.
 
“The National government, through the Department of Human Settlements, unveiled significant updates to their Finance Linked Individual Subsidy Programme (FLISP), now called First Home Finance, with the aim to improve access to affordable and gap housing. The expanded policy is still in the nascent stage of implementation, however, and its effects are likely not to be evident in market trends until next year.”
 
Kriek adds that Sentinel Homes offers the first open-market alternative to mortgages. By expanding access to housing finance, it is serving those 5%-10% of housing consumers who lack housing finance, despite being creditworthy and having the necessary disposable income.
 
“Now is the time in the property market cycle to escape the rent trap and start meaningful steps toward long-term financial health. Homeownership is a significant part of that equation,” says Kriek.
 
“You are more likely to buy something you can really afford if you buy it in the current conditions. There is the added upside that prices for properties priced around the average can only really go one way from here – and that is up!”

ENDS
 
MEDIA CONTACT: Rosa-Mari Le Roux, rosa-mari@atthatpoint.co.za, 060 995 6277, www.atthatpoint.co.za 
 
For more information on Sentinel Homes please visit:
Website: www.sentinelhomes.co.za
Facebook: Sentinel Homes