Welcome back! Are you getting the deals yet? If not, Basic Membership is only $2.99 per month, Silver ($25 pm), Gold ($100 pm) or Diamond ($1,000 pm). The realestate deal alerts and luxury goods deals go straight into YOUR mailbox before anywhere else! Want to be notified the next time we post something? Get the O-GRADY.com RSS feed.
It has been said that residential property has a fundamental cyclic nature, and should be a long term investment. This same cyclic nature is being ignored by those who aim for short term gains.
Those who complain most about the downturn in property trends, are usually folk who have bought within the last 3 years. These individuals were banking on prices to rise indefinitely, and to realize short term profit gains. Attitudes such as these are unwise, and frowned upon by more mature investors.
Those investors who have been around for some time, already know from experience that property crashes are followed by a period of price rises in due course. These price rises usually exceed the previous property highs. Anyone who has owned a property for more than 15 or 20 years will be able to testify to this. Chances are that they have been through more than one property low, only to see a new high arise from the ashes. For the man in the street, buying a home is probably the best investment he will ever make.
A typical case study has shown that a person who had bought a piece of property 35 years ago in a good area close to the coast for 20k, has the same property valued today at over 2 million. Only small improvements had been made. This translates to an annual increase of 14,7%. This is a very desirable return, and is by no means an isolated incident.
The question that many ask is whether the current property downturn worse is than previous era’s. The simple answer to that is “No”. Well, depending on the viewpoint of the person giving the answer.
E.g., in South Africa, the current property downturn can be attributed, amongst other things, to the following :
- The spiralling costs of resources which pushed up inflation and which in turn, necessitated high interest rates.
- The banks over reaction to the international crises and their consequent clamp down on mortgages. In some areas between 60% and 90% of applications are being rejected. Another problem is that successful applicants have to find between 25% and 30% deposit.
- The National Credit Act ( NCA ) which overnight made thousands of prospective homeowners no longer creditworthy.
This kind of action seems to indicate panic, which is sad and regrettable, since it was the same institutions that for the preceding few years encouraged excessive borrowing at all levels, and more especially in the home mortgage market where it was common practice to grant loans for 100% or 108%. This has been a root cause of today’s problems.
On the bright side, it is expected that the current situation should resolve itself over the next 2 – 3 years.
Article brought to you by Vaal Properties and Vaal Business Directory .
Related posts:
Recent Comments