Was in Grahamstown last week. Many "sold" signs and prices are defying gravity, appreciably higher than current ones in Knysna. Vested interests continue to say "It's different here" but the Grahamstown market was very weak only 6 years ago. Perimeter walls continue to be built, often topped with electric fencing.
Saw a beautiful Karoo cottage conversion in picturesque Prince Albert for R 750 000, probably a 1/3 of what it would sell for in G'Town. Nobody is bothering with obvious security there.
Visited a friend renting in George in a fairly new cluster development. 2 bed, 2 bath detached house for R 3500 per month and they thought thety were paying too much! Pointed out that owner was taking an absolute bath on the rental, with unit probably valued at close to 1 million Rand.
Oh, Grahamstown estate agent swore no repossessions so far in E.C.. Hard to believe considering the glut of property in Jeffreys Bay.
Anon, if you're talking about Sunset Beach in Blaauwberg, then stop talking, turn around and run very fast.
Sunset Beach is at the heart of Bubble Central - the huge expanse of McMansions from Milnerton right up to Atlantic Beach Golf Estate. They're all grossly overpriced, there's way too much inventory, and it's going to fall harder and faster than almost anywhere in the Cape.
But this coast is going to get nailed by a double whammy. In all the media hype about the War on Terror, then the Credit Crunch and now the looming Depression, we keep overlooking very plain and very sinister news about ocean levels. I know this sound loony, but then so did 40% falls in house prices a few years ago.
According to the latest data, the eastern shore of Table Bay is pretty much stuffed. And we're not talking fifty years from now. We're talking three or four years. Take a walk down Milnerton Beach and you can already sea the wave damage carving up the golf course - that tar thing falling onto the beach was a path for carts a couple of years ago.
A marine science buddy of mine also told me something that should be taught to every person on the planet so they can understand how bad it's about to get. He told me that for every one meter the sea rises, you have to assume at least seven meters of wave damage in shore. So the sea rises half a meter, that's the coast road or the railway line washed away. What's behind that? Your property? Okay, suddenly your garden is the coast, and when there's a storm, you're under water.
As if that wasn't enough there's also that nasty little thing called the water table. If the sea is rising, so is the water table, which means wetlands spread, lush properties turn into swamps, and pretty streams start eroding your house's foundations. Basically you don't want to live ANYWHERE lower than Wynberg or Claremont in the next ten years. Sun Valley near Fishhoek is going to be the first to go: it's actually below sea level, and people tell me locals call it the Pit of Despair. The lower lying bits around Observatory are next - Rondebosch East, and most of the industrial area around Salt River. Then comes Marine Da Gama, Lakeside, bits of Muizenberg. Interestingly enough large chunks of Khayalitsha are higher than Muizenberg and Lakeside: anyone up for a property bubble around high-lying areas in the next twenty years?
So to answer your question: buy only properties that are high and dry, and don't buy anything until it costs 3.5 times combined salary.
Bean Counter what you didnt metion is as sea levels rise the chances of storm surge increases quite a bit. Table mountain is going to be an island and Woodstock is going to be come prime beachfront haha already buildings on the foreshore with basements have to run pumps to keep them dry.
Live in Milnerton area and looking to buy in the area. But I tend to do my homework. Everything looked great until I unearthed a lot of academic stuff on climate change and it's impact. (I won't bore you with the detail but the info is easy to find on Google). You just have to past a lot of waffle though. Unfortunately almost nothing academic on this area but the implications are clear and the evidence of the 2008 storm is rather indisputable.
I'm now in limbo as the entire area's future is looking more and more like what it used to be... a tidal marshland.
And yes, a minor rise in sea level is going to redefine property value in the area. The danger is not so much from the rise as from the increasing ferocity of storm surges. The combination of a small sea level rise in the next 10 to 20 years and the increasing impact of el nino and la nina has persuaded me to steer clear of Flamingo Vlei and surrounds.
Robbie, i havent been to Grahamstown for a long time but its property market has always been driven by student accommodation needs. Country wide there seems to be a shortage of student accom. and i would guess that Grahamstown is no different. It certainly had a shortage in the 80's when i was a student there. This time of year one should expect a flury of action as parents buy their little darlings a house to live in and to rent rooms to their friends.
Anon, dont bother with Sunset Beach! Overpriced is an understatement. I'm of the opinion that the prices should be less than halved!!!
I'm not going to go on about rising sea levels, bla bla bla! Living on the coast is a personal lifestyle option. Sh!t happens!
Sunset Beach is beautiful but value for money is a ripper! I really cant wait for prices in areas like that to drop faster than you can say GREAT DEPRESSION!
Thanks to all the folks who commented on the Sunset beach question (especial Bean Counter).
I agree the sea level is a concern, especially after last winter's storm when parking lots next to the beach were flooded.
I also agree most of the houses in the area are ugly, overpriced, MacMansions. Though I must say the prices are slowly starting to come down (before you couldn't find anything under 3M and now there are quite a few options in the 2.5M range). But I agree, the prices will probably go down even more.
I think I remember some time ago there was a question about the best areas to live in Cape Town. However, it was quite a long time ago and there weren't that many answers.
So I would like to ask a similar, but a bit more specific, question again:
What, in your opinion, is the best place to live in Cape Town. To make it more specific, let's place the following restrictions:
1. Decent free-standing 3-4bed house can be had for 2.5-3M.
2. Relatively close to the CBD (let's say 30 min max without traffic).
Heck Anon? I really thought about your question and frankly if you want all three conditions then you probably need to buy in New Zealand, Oz, USA or the UAE because a decent sized and priced, low traffic, low crime propery hasn't been seen in SA for a loooong time. On a serious not, forget low crime as that's a pipe dream and rather focus on risk factors such as proximity to highways, industrial areas etc. As to decent size, well forget Gardens and Kloofnek then. Frankly your best bets are Pinelands, Milnerton, Milnerton Ridge, Flamingo Vlei. Maybe other people have some ideas as well. However, in my opinion all of these areas are still far too expensive as the recession has not even begun to really bite here.
ABSA's house price index is generally skews towards the 'upside'... but no surprise since they have the largest loan book and coincidental risk. Standard Bank on the other hand follows a more realistic (and volatile) index and I generally prefer their approach. At least they keep it neutral and don't try to 'talk' the market up like ABSA does. Very interesting research put out by Standard Bank this morning: Median house price growth slips into red for first time in a decade. It peaked in '04 and has been slipping ever since. The median for 2008 is -0.3% and gaining speed. In real terms, using CPI to deflate nominal data, the decline is 12%. Median decline for Dec 08 is -3.3% y/y. The slide is only starting and we haven't even properly seen the recession yet. If the slides of +20% in places like the UK, USA, OZ, Hong Kong and the UAE are anything to go by then there's at the very least another 20% or so for us to go.
Do yourself a favour and read this excellent research by Carmen Reinhart and Kenneth Rogoff (Harvard Economics Department)as quoted in SBK's research:
"The Aftermath of Financial Crisis" December 2008.
Go here for the paper ...
http://www.economics.harvard.edu/faculty/rogoff/Recent_Papers_Rogoff and follow the link.
The bottom line according to them? History shows that post a banking crisis the downturn generally makes for a 35.5% cummulative decline in real house prices (59.9% in equities) from peak to trough with the downturn phase lasting an average 3.4 years. And our 'decline' phase has only just started...
About buying property and what you're looking for.
Atlantic Golf Estate is your best bet! I have a friend that stays there and I thought that the prices were like 3 mill up (cause its really that exclusive).
Well, I surfed the net the other day and was surprised that a 3 bedroom goes for avg. 1.75 mill. I am confident that you will get a 4 bedroom, 2/3 bathroom, double lock up garage for 2.5 million.
Check it out! You probably looking at an extra 5-10 mins travel time though (without traffic).
Check it out and let us know! I can tell you that its "Value for money" in this day and age! The location, the setup, the security!!! That golf estate is fantastic!
Article from http://www.kiplinger.com/columns/picks/archive/2009/pick0119.htm
"I lived and worked in Tokyo in the roaring '80s. By the end of the decade, Japanese property prices had climbed to preposterous levels. Whenever I expressed skepticism about local real estate prices to the Japanese, I received this kind of response: "You foreigners don't understand. Japan is a small island nation with no natural resources. Property prices only go up."
In 1990, the bubble burst. The value of Japanese real estate, as well as the value of Japanese stock values, ultimately fell 70% to 80%. They have never really recovered.
In 1993, I relocated to Hong Kong. China was booming and Hong Kong property prices were headed into the stratosphere. When I questioned how this was sustainable, I repeatedly heard this response from locals: "Hong Kong is a small island with no natural resources. Property prices only go up."
In 1997, the Asian economic crisis erupted and China regained sovereignty over Hong Kong from Britain. The Hong Kong real estate market collapsed and eventually declined 50%.
In February 2006, I repatriated to the U.S. Interested in buying a house, I did some research on the residential market. My vocabulary wasn't large enough then to comprehend terms such as collateralized mortgage obligation and credit-default swap, but what I saw looked and smelled familiar: a bubble.
The rationale from Americans was a bit different from what I heard in Asia. It went like this:: In the U.S., waves of young immigrants feed demand for housing, which never falls in price (at least not nationwide), etc., etc. Apparently, Americans are as capable of getting drunk on their own bubbly as the Japanese and Chinese."
Which of course brings us to SA and black diamonds, housing shortages, decoupling (lol) and bla bla bla
Re Sunset Beach, was at a insolvent estate auction the other day.
The property was situated in a nice part of Sunset Beach and was for sale for R3.2 millions through agents.
The owner went bang and it was put up for auction. The price obtained at the auction......R1.5 million,
Now its for sale back with agents for R2.799 million as the bank would not accept the auction bid.
Sunset Beach is overpriced by at least 30%. The main reason for this is that agents have made it out to be a slice of heaven with only so many houses available in the area and thus creating a demand. Now with the bubble popping, these houses are not selling.
The same applies with Royal Ascot up the road. Way way overpriced and too much stock available. Its a matter of time before the market gives in and prices plummet there too.
Anon? Spot on about Sunset. That bank also still has to come to a simple reality check. Sunset Beach just isn't worth 3 bars.
On Royal Ascot you couldn't be more right. I rent there because when I first saw the asking prices I just laughed and rather pay the rent at one third of what a bond would cost. And here's the clincher... if the rent goes up then I move elsewhere as the rent is already premium for what you get.
The entire Royal Ascot is a monumental tribute to developer and agent greed and buyer stupidity. It is only easy credit that put these properties into the 'late' million price bracket (as agents love to tout the over inflated asking prices).
I've been speculating with property all over since the 90's and did my homework in the Milnerton Ridge area properly and came to the very simple conclusion that everything in the area is selling at a 40% to 60% premium over real value.
On average you're looking at a 500 sqm erf (terrible topsoil) and about 180 sqm under roof with a 'market related' price tag of on average 1.3 bars. Now that equates to around 7k to 8k per sqm. Now I'd pay that if the bathroom was marble and the kitchen tops granite. But what you get in almost every case (and don't take my word for it, go check for yourself) is:
1. No roofing insulation 2. Loose plastic sealing in the roof for waterproofing (this one really surprised me) 3. Industrial steel frame door arches 4. Really cheap plumbing finishings i.e. kitchen and bathroom fittings 5. Generally shoddy building work and cheap trimmings 6. Sewer access pipes that randomly stick up through the lawns and are almost always at strange angles (this one also surprised me as I saw it in many instances. I wonder what the sewer reticulation looks like underground?) 7. Rising damp and mould because frankly damp proofing is non existent both at foundation and roof levels.
About the only plus I found is good quality aluminium frame windows.
In general the inside and outside quality and finishing on these places suggest to me a real building cost of between 3k and 4k per sqm, no more. And people go and pay 8k a sqm... go figure.
The reality is that at best those properties (call it the same example as above, 3 bed, 180 sqm) are worth between 800k and 1 bar, no more.
But if people want to keep paying 20 years of their worklife earnings at a premium, for rubbish, well then I'll keep renting at a rent I'm prepared to pay
Joe, great write up about the Milnerton, Royal Ascot area. I bought my place a year and a half ago in Royal Ascot.
- 65 m2 - 2 bed - 1 full bath - 1 basement parking - open lounge/dining/kitchen
Price?... R630k! Unfortunately, like any other area and price at the time, it was "cheap". I definitely don't regret. Different strokes for different folks.
I intend keeping the place in the long run (buy something else and rent it out after its paid off - soon), so I think the people really suffering or regretting are:
- those who bought above their means - those who have property as investment homes
I'm fortunate that I earn enough to almost double my premium. But I am in the minority! And I bought my place because its a place that, no matter where I go, I can always come back to, and call home. Yes, I pay a premium price but I dont have to worry about owners telling me that they are not renewing my lease and the stress of looking for another place and co-ordinating move (again!). Again, different strokes for different folks! ;)
I really think my place is worth 450k-500k. Interesting though, is that any place with my credentials, in Royal Ascot, is going for R750k-R780K. I have however seen a handful going for R720k!
(I was lucky that, when I bought, interest rates were up up up, and the developer just built the units, and decided to not get greedy and sell it to cover his ass, costs and legal fees). So I bought for R630k, but today its ADVERTISED for R750k-R780k!
I think people and agents are still living in their dream world cause who, in todays market, will buy a 1 bedroom for 600k in Royal Ascot?
Then again, I could have saved a R100k on my bond and settled for Parklands... but thats a whole other story for another day! (As I refer to it as... mini-Nigeria) LOL
But the fact is, most people in Royal Ascot bought in recent years, and that means that they paid (almost) peak prices!
While I am in a comfortable, financial position, its a good laugh to see how the greedy are suffering today; that includes agents, greedy investors, people who bought above their means, car dealerships, etc.
Sakkie, nice riposte. No intention to offend you on my part. Anyway, you didn't make a bad buy but at over 9k per sqm is quite a premium. The 1 and 2 beds are a safe bet. Many people who want a 3 bed can now only afford a 1 or 2 bed so your market segment is pretty safe. If a bloke can only get an 800k bond, well then he downgrades from 3 bed to 2 bed so you'll have buyers still. And you bought within your means so you can ride it out. No problem, smart move!
18 comments:
Was in Grahamstown last week. Many "sold" signs and prices are defying gravity, appreciably higher than current ones in Knysna. Vested interests continue to say "It's different here" but the Grahamstown market was very weak only 6 years ago. Perimeter walls continue to be built, often topped with electric fencing.
Saw a beautiful Karoo cottage conversion in picturesque Prince Albert for R 750 000, probably a 1/3 of what it would sell for in G'Town. Nobody is bothering with obvious security there.
Visited a friend renting in George in a fairly new cluster development. 2 bed, 2 bath detached house for R 3500 per month and they thought thety were paying too much! Pointed out that owner was taking an absolute bath on the rental, with unit probably valued at close to 1 million Rand.
Oh, Grahamstown estate agent swore no repossessions so far in E.C.. Hard to believe considering the glut of property in Jeffreys Bay.
What do people think about Sunset beach? Both the location and the current price levels (3-4 bed houses start from about R3M)?
Thanks.
Anon, if you're talking about Sunset Beach in Blaauwberg, then stop talking, turn around and run very fast.
Sunset Beach is at the heart of Bubble Central - the huge expanse of McMansions from Milnerton right up to Atlantic Beach Golf Estate. They're all grossly overpriced, there's way too much inventory, and it's going to fall harder and faster than almost anywhere in the Cape.
But this coast is going to get nailed by a double whammy. In all the media hype about the War on Terror, then the Credit Crunch and now the looming Depression, we keep overlooking very plain and very sinister news about ocean levels. I know this sound loony, but then so did 40% falls in house prices a few years ago.
According to the latest data, the eastern shore of Table Bay is pretty much stuffed. And we're not talking fifty years from now. We're talking three or four years. Take a walk down Milnerton Beach and you can already sea the wave damage carving up the golf course - that tar thing falling onto the beach was a path for carts a couple of years ago.
A marine science buddy of mine also told me something that should be taught to every person on the planet so they can understand how bad it's about to get. He told me that for every one meter the sea rises, you have to assume at least seven meters of wave damage in shore. So the sea rises half a meter, that's the coast road or the railway line washed away. What's behind that? Your property? Okay, suddenly your garden is the coast, and when there's a storm, you're under water.
As if that wasn't enough there's also that nasty little thing called the water table. If the sea is rising, so is the water table, which means wetlands spread, lush properties turn into swamps, and pretty streams start eroding your house's foundations. Basically you don't want to live ANYWHERE lower than Wynberg or Claremont in the next ten years. Sun Valley near Fishhoek is going to be the first to go: it's actually below sea level, and people tell me locals call it the Pit of Despair. The lower lying bits around Observatory are next - Rondebosch East, and most of the industrial area around Salt River. Then comes Marine Da Gama, Lakeside, bits of Muizenberg. Interestingly enough large chunks of Khayalitsha are higher than Muizenberg and Lakeside: anyone up for a property bubble around high-lying areas in the next twenty years?
So to answer your question: buy only properties that are high and dry, and don't buy anything until it costs 3.5 times combined salary.
Bean Counter
Bean Counter what you didnt metion is as sea levels rise the chances of storm surge increases quite a bit.
Table mountain is going to be an island and Woodstock is going to be come prime beachfront haha
already buildings on the foreshore with basements have to run pumps to keep them dry.
I tend to agree with Bean Counter...
Live in Milnerton area and looking to buy in the area. But I tend to do my homework. Everything looked great until I unearthed a lot of academic stuff on climate change and it's impact. (I won't bore you with the detail but the info is easy to find on Google). You just have to past a lot of waffle though. Unfortunately almost nothing academic on this area but the implications are clear and the evidence of the 2008 storm is rather indisputable.
I'm now in limbo as the entire area's future is looking more and more like what it used to be... a tidal marshland.
And yes, a minor rise in sea level is going to redefine property value in the area. The danger is not so much from the rise as from the increasing ferocity of storm surges. The combination of a small sea level rise in the next 10 to 20 years and the increasing impact of el nino and la nina has persuaded me to steer clear of Flamingo Vlei and surrounds.
They don't call it Flamingo 'Vlei' for no reason
Robbie, i havent been to Grahamstown for a long time but its property market has always been driven by student accommodation needs. Country wide there seems to be a shortage of student accom. and i would guess that Grahamstown is no different. It certainly had a shortage in the 80's when i was a student there. This time of year one should expect a flury of action as parents buy their little darlings a house to live in and to rent rooms to their friends.
Anon, dont bother with Sunset Beach! Overpriced is an understatement. I'm of the opinion that the prices should be less than halved!!!
I'm not going to go on about rising sea levels, bla bla bla! Living on the coast is a personal lifestyle option. Sh!t happens!
Sunset Beach is beautiful but value for money is a ripper! I really cant wait for prices in areas like that to drop faster than you can say GREAT DEPRESSION!
Thanks to all the folks who commented on the Sunset beach question (especial Bean Counter).
I agree the sea level is a concern, especially after last winter's storm when parking lots next to the beach were flooded.
I also agree most of the houses in the area are ugly, overpriced, MacMansions. Though I must say the prices are slowly starting to come down (before you couldn't find anything under 3M and now there are quite a few options in the 2.5M range). But I agree, the prices will probably go down even more.
I think I remember some time ago there was a question about the best areas to live in Cape Town. However, it was quite a long time ago and there weren't that many answers.
So I would like to ask a similar, but a bit more specific, question again:
What, in your opinion, is the best place to live in Cape Town. To make it more specific, let's place the following restrictions:
1. Decent free-standing 3-4bed house can be had for 2.5-3M.
2. Relatively close to the CBD (let's say 30 min max without traffic).
3. Low crime.
Heck Anon? I really thought about your question and frankly if you want all three conditions then you probably need to buy in New Zealand, Oz, USA or the UAE because a decent sized and priced, low traffic, low crime propery hasn't been seen in SA for a loooong time. On a serious not, forget low crime as that's a pipe dream and rather focus on risk factors such as proximity to highways, industrial areas etc. As to decent size, well forget Gardens and Kloofnek then. Frankly your best bets are Pinelands, Milnerton, Milnerton Ridge, Flamingo Vlei. Maybe other people have some ideas as well. However, in my opinion all of these areas are still far too expensive as the recession has not even begun to really bite here.
ABSA's house price index is generally skews towards the 'upside'... but no surprise since they have the largest loan book and coincidental risk. Standard Bank on the other hand follows a more realistic (and volatile) index and I generally prefer their approach. At least they keep it neutral and don't try to 'talk' the market up like ABSA does. Very interesting research put out by Standard Bank this morning: Median house price growth slips into red for first time in a decade. It peaked in '04 and has been slipping ever since. The median for 2008 is -0.3% and gaining speed. In real terms, using CPI to deflate nominal data, the decline is 12%. Median decline for Dec 08 is -3.3% y/y. The slide is only starting and we haven't even properly seen the recession yet. If the slides of +20% in places like the UK, USA, OZ, Hong Kong and the UAE are anything to go by then there's at the very least another 20% or so for us to go.
Do yourself a favour and read this excellent research by Carmen Reinhart and Kenneth Rogoff (Harvard Economics Department)as quoted in SBK's research:
"The Aftermath of Financial Crisis" December 2008.
Go here for the paper ...
http://www.economics.harvard.edu/faculty/rogoff/Recent_Papers_Rogoff and follow the link.
The bottom line according to them? History shows that post a banking crisis the downturn generally makes for a 35.5% cummulative decline in real house prices (59.9% in equities) from peak to trough with the downturn phase lasting an average 3.4 years. And our 'decline' phase has only just started...
Anon,
About buying property and what you're looking for.
Atlantic Golf Estate is your best bet! I have a friend that stays there and I thought that the prices were like 3 mill up (cause its really that exclusive).
Well, I surfed the net the other day and was surprised that a 3 bedroom goes for avg. 1.75 mill. I am confident that you will get a 4 bedroom, 2/3 bathroom, double lock up garage for 2.5 million.
Check it out! You probably looking at an extra 5-10 mins travel time though (without traffic).
Check it out and let us know! I can tell you that its "Value for money" in this day and age! The location, the setup, the security!!! That golf estate is fantastic!
Own gym, own golf course... its fabulous!!!
Nice crash course about bubbles
http://www.chrismartenson.com/crashcourse/chapter-15-bubbles
Article from
http://www.kiplinger.com/columns/picks/archive/2009/pick0119.htm
"I lived and worked in Tokyo in the roaring '80s. By the end of the decade, Japanese property prices had climbed to preposterous levels. Whenever I expressed skepticism about local real estate prices to the Japanese, I received this kind of response: "You foreigners don't understand. Japan is a small island nation with no natural resources. Property prices only go up."
In 1990, the bubble burst. The value of Japanese real estate, as well as the value of Japanese stock values, ultimately fell 70% to 80%. They have never really recovered.
In 1993, I relocated to Hong Kong. China was booming and Hong Kong property prices were headed into the stratosphere. When I questioned how this was sustainable, I repeatedly heard this response from locals: "Hong Kong is a small island with no natural resources. Property prices only go up."
In 1997, the Asian economic crisis erupted and China regained sovereignty over Hong Kong from Britain. The Hong Kong real estate market collapsed and eventually declined 50%.
In February 2006, I repatriated to the U.S. Interested in buying a house, I did some research on the residential market. My vocabulary wasn't large enough then to comprehend terms such as collateralized mortgage obligation and credit-default swap, but what I saw looked and smelled familiar: a bubble.
The rationale from Americans was a bit different from what I heard in Asia. It went like this:: In the U.S., waves of young immigrants feed demand for housing, which never falls in price (at least not nationwide), etc., etc. Apparently, Americans are as capable of getting drunk on their own bubbly as the Japanese and Chinese."
Which of course brings us to SA and black diamonds, housing shortages, decoupling (lol) and bla bla bla
Re Sunset Beach, was at a insolvent estate auction the other day.
The property was situated in a nice part of Sunset Beach and was for sale for R3.2 millions through agents.
The owner went bang and it was put up for auction. The price obtained at the auction......R1.5 million,
Now its for sale back with agents for R2.799 million as the bank would not accept the auction bid.
Sunset Beach is overpriced by at least 30%. The main reason for this is that agents have made it out to be a slice of heaven with only so many houses available in the area and thus creating a demand. Now with the bubble popping, these houses are not selling.
The same applies with Royal Ascot up the road. Way way overpriced and too much stock available. Its a matter of time before the market gives in and prices plummet there too.
Anon? Spot on about Sunset. That bank also still has to come to a simple reality check. Sunset Beach just isn't worth 3 bars.
On Royal Ascot you couldn't be more right. I rent there because when I first saw the asking prices I just laughed and rather pay the rent at one third of what a bond would cost. And here's the clincher... if the rent goes up then I move elsewhere as the rent is already premium for what you get.
The entire Royal Ascot is a monumental tribute to developer and agent greed and buyer stupidity. It is only easy credit that put these properties into the 'late' million price bracket (as agents love to tout the over inflated asking prices).
I've been speculating with property all over since the 90's and did my homework in the Milnerton Ridge area properly and came to the very simple conclusion that everything in the area is selling at a 40% to 60% premium over real value.
On average you're looking at a 500 sqm erf (terrible topsoil) and about 180 sqm under roof with a 'market related' price tag of on average 1.3 bars. Now that equates to around 7k to 8k per sqm. Now I'd pay that if the bathroom was marble and the kitchen tops granite. But what you get in almost every case (and don't take my word for it, go check for yourself) is:
1. No roofing insulation
2. Loose plastic sealing in the roof for waterproofing (this one really surprised me)
3. Industrial steel frame door arches
4. Really cheap plumbing finishings i.e. kitchen and bathroom fittings
5. Generally shoddy building work and cheap trimmings
6. Sewer access pipes that randomly stick up through the lawns and are almost always at strange angles (this one also surprised me as I saw it in many instances. I wonder what the sewer reticulation looks like underground?)
7. Rising damp and mould because frankly damp proofing is non existent both at foundation and roof levels.
About the only plus I found is good quality aluminium frame windows.
In general the inside and outside quality and finishing on these places suggest to me a real building cost of between 3k and 4k per sqm, no more. And people go and pay 8k a sqm... go figure.
The reality is that at best those properties (call it the same example as above, 3 bed, 180 sqm) are worth between 800k and 1 bar, no more.
But if people want to keep paying 20 years of their worklife earnings at a premium, for rubbish, well then I'll keep renting at a rent I'm prepared to pay
Joe, great write up about the Milnerton, Royal Ascot area. I bought my place a year and a half ago in Royal Ascot.
- 65 m2
- 2 bed
- 1 full bath
- 1 basement parking
- open lounge/dining/kitchen
Price?... R630k!
Unfortunately, like any other area and price at the time, it was "cheap". I definitely don't regret. Different strokes for different folks.
I intend keeping the place in the long run (buy something else and rent it out after its paid off - soon), so I think the people really suffering or regretting are:
- those who bought above their means
- those who have property as investment homes
I'm fortunate that I earn enough to almost double my premium. But I am in the minority! And I bought my place because its a place that, no matter where I go, I can always come back to, and call home. Yes, I pay a premium price but I dont have to worry about owners telling me that they are not renewing my lease and the stress of looking for another place and co-ordinating move (again!). Again, different strokes for different folks! ;)
I really think my place is worth 450k-500k. Interesting though, is that any place with my credentials, in Royal Ascot, is going for R750k-R780K. I have however seen a handful going for R720k!
(I was lucky that, when I bought, interest rates were up up up, and the developer just built the units, and decided to not get greedy and sell it to cover his ass, costs and legal fees). So I bought for R630k, but today its ADVERTISED for R750k-R780k!
I think people and agents are still living in their dream world cause who, in todays market, will buy a 1 bedroom for 600k in Royal Ascot?
Then again, I could have saved a R100k on my bond and settled for Parklands... but thats a whole other story for another day! (As I refer to it as... mini-Nigeria) LOL
But the fact is, most people in Royal Ascot bought in recent years, and that means that they paid (almost) peak prices!
While I am in a comfortable, financial position, its a good laugh to see how the greedy are suffering today; that includes agents, greedy investors, people who bought above their means, car dealerships, etc.
God Bless America!
Sakkie, nice riposte. No intention to offend you on my part. Anyway, you didn't make a bad buy but at over 9k per sqm is quite a premium. The 1 and 2 beds are a safe bet. Many people who want a 3 bed can now only afford a 1 or 2 bed so your market segment is pretty safe. If a bloke can only get an 800k bond, well then he downgrades from 3 bed to 2 bed so you'll have buyers still. And you bought within your means so you can ride it out. No problem, smart move!
Post a Comment