Property Advice

Boom Times are Over

Private Property South Africa
Lea Jacobs |
Boom Times are Over

Property booms come and go and although many people make an awful lot of money during an upturn, an alarming number don’t.

Knowing when to invest is the key. It takes more than a crystal ball to predict what is going to happen and when it is going to stop. Property booms do not happen overnight; it is a gradual process that gains momentum until eventually the situation cannot sustain itself and property prices go into free-fall.

The recent recession that was witnessed around the world has had a major impact on the way a number of people view the property market. Many got severely burnt by the fallout and not only lost their homes, but a great deal of money in the process. This, of course is nothing new, history has taught us that what goes up must come down, however, the magnitude of the last recession was extremely severe and you have to wonder whether it has put a large percentage of the world’s population off the idea of investing in property.

Buyers are far more cautious than before. This is not necessarily a bad thing, given the overall madness that the last boom induced. However, being cautious is one thing, being terrified to ever invest in this very lucrative area again is quite another.

Although not statistics are available, it would be interesting to know just how many South Africans who should never have been allowed to own a second home lost the property once the recession took hold. It sounds harsh, but think about it, owning two homes is an expensive exercise and one that in the past was reserved for the rich and famous. As the property bubble started to expand, suddenly everyone was (in the banks eyes anyway) a suitable candidate and owning that little place by the sea became a must.

South African’s like their overseas counterparts had been seduced by the seemingly unlimited amount of credit out there. Credit cards were maxed out, expensive cars bought and personal loans were the order of the day. This situation was never sustainable and when the crunch came many were left high and dry – unable to meet the demands of the debt.

The property market both here and abroad has been badly affected. The abundant availability of property on the market on a nationwide scale is a clear indication that not all is well in paradise. We keep hearing that it is a buyer’s market and that sellers have to price their properties accordingly. The problem with this is that many sellers bought at the height of the boom when prices were unrealistic – losing a couple of thousand Rand is one thing, losing hundreds of thousands is quite another. The situation has left many sellers feeling flustered and frustrated at being unable to sell their homes at a price that would help them to at least recover the original outlay.

At the height of the property boom, sellers could virtually dictate their asking price and due to the frenzy of buyers all competing for the same properties, in some instance huge profits lined the pockets of those who had invested wisely. The drastic rate at which price averages accelerated astonished even those who seemed to be “in the know”, who were still boldly stating shortly before the recession that the boom was unprecedented and that there was not end in sight for the good times.

The situation has improved, house prices are rising once again and the buyers are slowly but surely coming out of the woodwork. It doesn’t take a crystal ball to realise that investing in property is a good investment, but it may help when it comes to knowing when and when not to invest.

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