The South African property market is going through a slump in the year 2019.
Some owners are settling to sell their homes for less than the amount they purchased them at, 2 or 3 years before.
Blame it on the politics right? 2019 general elections? Uncertainty due to that right? Snag in the economy?
Well that doesn’t hold fruit anymore because the election is over and the it is still going through a rut. So its not that.
So what major challengers are buyers facing in the property market?
1. Upfront cash required
Thats right!! People are finding it difficult to get sufficient cash flow to cover deposits and legal fees.
Financial institutions are hoping buyers will put up deposits to cover the difference between the approved home loan and the purchase price.
Big blow to the property market for buyers!!!!!
Even worse, only 38% of 100% home loan applications are being approved nowadays, which is not great news for those looking to that as an option.
2. Renting out
Because of the fact that you are running into the risk of losing out on selling properties nowadays, sellers are now opting into renting options.
Even if the average rental income in the property market has fallen from previous years, it seems to be a more viable option for those who are discouraged from selling.
Not great news if you are looking to buy a home or are an investor right? Hold on a moment!!!
There are 2 things that you could consider.
Well one interesting solution is proposed by Meyer De Waal, a property attorney in Cape Town. Mr De Waal has pioneered the concept of Rent2Buy.
The concept revolves around renting a property for a period of time and renting it at a higher rate than the normal rent.
For Eg. If you normally rent at R10000 for a property, through the Rent2Buy approach you rent a property at R15000, with R10000 as normal rent and the R5000 is moved off as down payment on the purchase price.
The down payments are then added up and eventually it helps you in improving your credit score. This in-turn improves your footing infront of a financial institution, when you are applying for a home loan.
The other alternative is called installment sales.
This involves the seller of the property getting quick access to the deposit a buyer puts on a property. Access is granted once the ISA contract, which governs this type of sale, is registered at the deeds office.
The ISA type agreement however, has legal formalities based on the Alienation of Land Act of 1968. Keep that in mind!!!
These are some interesting alternatives that you as an investor could rely upon, even with the slump in our property market.
To get more details on this article click here.
To get more information on the Rent2Buy concept, check out this video.