Hello From Plett

Well Spring has sprung, the days are longer, and things are warming up!  Albeit slowly!  The school holidays, the first week of this month, has seen a number of visitors in town, who have enjoyed a variety of events laid on for all to enjoy.

From cycle races, and a sponsored walk for paws, as well as the “Heart and Sole” marathon event arranged by our local athletics club, guaranteed to satisfy the sports fanatic in all of us.

We congratulate our local cyclist Kevin Evans who is currently completing at World Champs in France, and wish him every success.

RE/MAX is also very proud of our very own Bruce Noble who won the local “So You Think You Can Cook” competition, as well as being one of two local NSRI members who were chosen for special training in America.  Well done Bruce!

The local buzz is tangible, as business’ look forward to the approach of the December season with enthusiasm.  On the property front things remain steady and encouraging, with sales recorded regularly, whilst prices and values remain low, in line with the National market trends.  The general outlook is optimistic.

The RE/MAX Prime Properties team look forward to meeting you when you next visit Plett.

Renovate With Care

Renovations can add value to a property, but only if they are done in the right way, according to Adrian Goslett, CEO of RE/MAX of Southern Africa.  Goslett noted that many homeowners tend to undertake home renovations at great cost but add very little or no value to their property when they decide to sell.  This is why it is important for home owners to research certain aspects before venturing down the renovation path, especially if the renovation is specifically for investment and resale purposes.

Goslett said that one of these elements is the general value of property in the area in which the home is situated.  Although property prices can vary from street to street, most suburbs will have an average sale price.  The homeowner can risk over-capitalising if the cost of renovation vastly outweighs the profit that can be made, if the property is sold at a later stage.  Over-capitalising can actually have the opposite effect and devalue a property.  Its location and condition, especially in comparison to other nearby properties, largely dictate the value of a home.  This means that before they break ground, homeowners should have an idea of property value in the area and the current real estate market.

Property websites and newspapers will give the homeowner some idea of the market trends and prices, however, consulting with a real estate professional specialising in that area will give the homeowner a clearer picture of the market.  An agent will know what current buyers are looking for and at what price.  Different features appeal to different buyers.

Different kinds of renovations could appeal to different buyers that are attracted to the area.  Knowing the particular area's general buyer profile and the features they look for, is essential to undertaking a renovation project that will add the most value.  If the predominant kind of buyer in an area is a business executive wanting low maintenance and lock-up-and-go features, a swimming pool could prove to be more of a hindrance than a value adding element, while a family buyer could see this as a draw card.

Due to the fact that renovation is often an emotional decision, Goslett advised homeowners to have a set budget before starting and to try stick to it as much as possible.  As a rule of thumb, the renovation cost should not be more than 25% of the estimated value of the home.  "Setting a renovation budget will also require the homeowner to do some research regarding the associated costs.  Certain elements may cost more than expected, so this will need to be planned for ahead of time.  A lack of financial planning could result in a poorly completed or half-finished project, either of which could affect the value of the property negatively," Goslett advised.

Some homeowners may be tempted to undertake the renovations themselves to mitigate costs.  However, this is generally not recommended practice unless the homeowner is qualified to do so.  Badly completed DIY renovations can cost far more to rectify.

Value In Property Investment

THE CONFLICT between sound local economic news and renewed concern about the euro zone crisis, slower growth rates in China, Brazil and India and a UK recession call for a pragmatic approach to property investment.  The fundamental property drivers remain price and the availability of finance, the first measured by interest rates and the second by banks' willingness to lend and the criteria attached.

Seeff regional chairman and Dolphin Coast principal Andreas Wassenaar says the July reduction of the repurchase rate by 50 basis points reflected the impact of the slowing global market on the local economy and SA's main trading partners but paved the way for cash buyers, in particular, to take advantage of a buyers' market.  "It's said you make your profit in property when you buy, not when you sell.  If that is the case, rarely has there been a better profit-making opportunity," he says.

Pam Golding Properties uMhlanga and eMdloti area principal Elwyn Schenk believes the dilemma facing aspiring and potential investors has "never been so acute", underlining why property again appears to be a traditional, solid and lasting store of value.  "Investors view investment property as the ultimate inflation hedge, providing a regular, escalating income and healthy capital growth.  "Globally, fortunes have been made through property investments and today's tighter market conditions present an opportunity to buy property, often below replacement cost," he says.

However, as with every investment, property requires a selective approach.  Key to decision-making is position, with blue-chip areas and high-growth nodes likely to be more attractive.  Typically, these include properties in the Western Cape, Northern Durban/uMhlanga and Sandton, but also areas where substantial government infrastructure spending will spur growth, such as port developments around Richards Bay.  Schenk says property is one of the few asset classes against which people can borrow.  This is especially beneficial at times of low interest rates, since gearing can be maximised to improve net returns.  But investors also need to understand investment dynamics.  "Sound investment logic does not mean buying the best property in the area.  Billionaire Warren Buffet recently advised US investors to buy older homes in good areas to restore, to hold or resell," he says. In uMhlanga, prices range from R700 000 for a one-bedroom flat near Gateway to R18.9 Million for an Oyster Quays penthouse, with a range of options between. 

Harcourts Hilton principal Andrew Line says the English-style village is in demand for buy-to-let or potential bed-and-breakfast outlets. These properties offer opportunities for investors to secure assistance in paying off a bond.  One entry-level property was a five bedroom house priced at R1.15m, while at the top end of the market was a seven bedroom gentleman's residence in two of landscaped garden complete with a formal lounge, chef's kitchen, billiard room and gym offering potential for conversion to a boutique hotel.  Line says buy-to-let investors have dwindled significantly in recent years, but are now returning to the market with renewed vigour and confidence.

HOWEVER, RE/MAX OF SOUTHERN AFRICA CHIEF EXECUTIVE, ADRIAN GOSLETT says determining the fair market value for any property depends on numerous aspects that influence the perceived value.  That means correctly pricing a home is paramount, especially in a buyers' market.  "If a buyer compares two properties in the same area offering the same features, price will become the only factor that will separate each property and influence the decision-making process," he says.  Consequently, it is vital for agents to complete a comparative market analysis to provide sellers with the foundation from which to work.  The base analysis then provides the platform on which a home's distinctive characteristics can then add or detract value to ensure a fair market price and the swiftest time between going to market and concluding a sale.

Buyers Struggle To Meet Lending Criteria

While property pricing and market conditions favour buyers, many are still struggling to meet the lending criteria of financial institutions.  In light of this, many buyers are choosing to partner with a friend or family member to purchase property together.

This was the opinion of Adrian Goslett, CEO of RE/MAX of Southern Africa in a recent press release.  In today's property market, co-ownership has become an especially attractive option as the shared costs make it a much more affordable venture.  Although some banks no longer offer joint cheque or savings accounts, Goslett said that due to the vast number of buyers who are choosing to co-own with another party, many lenders do offer joint home loan accounts or mortgage packages that cater specifically for this situation.

He said there are definitely advantages of buying property with a partner, such as the greater prospect of finance being approved as well as the possibility of obtaining a bond for a higher amount.  Additionally, there is the benefit of a reduced individual financial commitment as all costs during and after the purchase process are shared.

"Both parties can contribute to the deposit, transaction costs, bond repayments, as well as the maintenance and utilities bills," said Goslett.  "It is important, however, that co-ownership is handled in the correct manner and that all aspects are discussed before any transaction has been concluded.  It is advisable that there is an agreement in writing that is signed by both parties, should any dispute arise in the future."

Goslett noted that some of the points that should be discussed and agreed upon between the parties are aspects such as:

-  What each one wants from the venture,
-  How long they plan to live together,
-  What happens if one wants to sell their share of the property in the future

The future plans of both parties will have a major impact on the partnership and how viable it is.  Each of the respective parties will have to be in agreement with regard to their expectations as well as their individual responsibilities.  Along with the shared cost, also comes shared responsibility.  To protect both co-owners, each partner should keep a record of all documents and payments made that relate to the property they jointly own.

If one person defaults on any of the payments, all partners will be held liable.  It is for this reason that choosing the right person to buy property with is so important and should be considered carefully.