A whopping 60 percent of Cape Town’s property sales are done on a cash basis, and the average price of property in the city is some R300,000 higher than anywhere else in South Africa.
That’s according to Lew Geffen, chairman of Lew Geffen Sotheby’s International Realty, who says the current seller’s market in Cape Town means that most properties that go on the market are statistically likely to receive more than one offer to purchase.
“That’s why it’s absolutely critical, if you’re in the market right now and you have to buy with a bond, to get a pre-qualification.”
Geffen was responding to the latest figures from bond originator ooba, which indicates that the average property price in Cape Town is R1.1 million, whereas the average in other parts of the country is around R800,000.
“The reality is the market in Cape Town right now is entirely a seller’s market. We’re battling to find stock to sell because people are scared that if they sell their own houses they won’t be able to find anywhere else to go. But at the same time, I can’t think of a period when it’s been easier to sell in Cape Town and get the price you want for your property if it’s realistic for the area.”
But for those buying with bonds, says Geffen, pre-qualification is absolutely essential to move quickly to secure a deal – especially competing with the number of cash buyers in Cape Town.
“My advice is simple and straightforward: go and see an estate agent in the area in which you want to buy, and get her to put you in touch with a bond originator before you even start looking for a house. The bond originator will tell you exactly what documentation you need, get all the paperwork together and approach a number of banks to pre-qualify you for a specific amount. And this costs you absolutely nothing.”
According to the national figures supplied by ooba, your chance of getting a bond approved through an originator is around 75 percent if your paperwork and credit record are in order, versus just over 50 percent going directly to your bank.
Geffen says the next step is to list with agents in the area, to ensure that you’re first to know about any new properties that come on the market.
“In Cape Town’s southern suburbs at the moment, for example, we’re averaging two to three offers on most realistically priced properties under R8 million, and that’s largely from calling the people on our buyers’ lists and taking them for viewings when we have a new listing. That’s before we start publicly marketing properties.”
Geffen says pre-qualification is especially important for people who are self-employed, because the amount of paperwork needed to process a bond application just about doubles.
“Most people don’t realise quite how much information the banks require, such as the latest company financials – not those from the previous year – as well as tax clearance certificates. All of these things take time, and if you’re in a race against a cash buyer chances are if you start the process only after you find the house you want, you’ll lose it.”
Geffen cautions that pre-qualification for a bond doesn’t absolutely guarantee that you’ll get the house you want, though.
“Although banks assess the bulk of their risk against the lender, they will also make sure that the property you’re buying is worth what you’re spending. Banks won’t let lenders over-capitalise on property, which is one way that the current sellers’ market is being kept in check.”
This article “Bond Pre-Approval A Must In Seller’s Market” was issued by Lew Geffen Sotheby’s SA.