Now more than ever, home buyers prioritise value for money
With interest rates at historic lows and serious sellers asking realistic prices in the current market, home buyers and investors, including a high percentage of first-time buyers, have realised there is significant opportunity and value for money on offer at present.
Those with cash or access to credit and an appetite to make the most of this environment are wasting no time in acting accordingly, snapping up the chance to secure sound medium to long-term investments in bricks and mortar, says Dr Andrew Golding, chief executive of the Pam Golding Property group.
“In today’s economy, value for money is key for consumers – no less so in the housing market. But how do we define value for money, bearing in mind that generally speaking, value is in the eye of the beholder?”
From a residential property perspective, perceived value – which is also impacted by personal preferences – is probably best described as the most advantageous combination of cost, quality and sustainability. In other words, acquired at a good price, with quality referring to being fit for purpose and meeting buyer needs, while sustainability pertains to economic, social and environmental benefits. Value for money also relates to acquiring ‘more home’ for a given price, and positive growth prospects – namely meaningful upside potential for the capital value or price of the home.
“Typically,” says Dr Golding, “a home that is located on the periphery of a traditional area or in an outlying or non-high growth area is more affordable and can have the potential for good value for money. In these cases, it is important to consider transport costs in the total cost of a home. This is because the homeowner may still need to commute to work and/or school and this can translate into a significant cost, both in terms of time and money, when living in a far-flung suburb or location, which would make the true cost of living in the supposedly more affordable home more expensive.
“However, in the wake of Covid-19 and with people now able to work remotely – either permanently or at least some of the time and most probably going forward – the calculation of likely transport costs for more distant suburbs and towns will be altered. This will mean that some areas previously considered too far away are now considered more affordable and better value-for-money as more people can live there while working remotely.
“The lack of congestion in second-tier cities such as Port Elizabeth, Bloemfontein, Kimberley, East London, Mbombela (formerly known as Nelspruit), Polokwane and Rustenburg, will prove more appealing to businesses and families. Apart from affordability and value-for money, these metros outside prime urban centres offer a better quality of life away from the stresses of high-density city living, particularly under a lockdown. However, this in turn depends on infrastructure keeping pace with development, which means that local authorities would be under pressure to provide basic services as well as education, healthcare, roads and telecommunications networks in order to keep up with rising demand from new residents and homeowners.”
Dr Golding says another source of value for money are homes within a market segment where demand is emerging or growing, but where supply is still insufficient to meet demand, for example, a type of home or location which appeals to a new lifestyle trend. Prime examples here are:
- live-work-play lifestyles offered typically via mixed-use developments.
- retirement homes, as South Africa is home to a growing retirement population with new active lifestyle demands which are not matched by much of the existing stock, and
- lock-up-and-go sectional title properties across all price bands, including those which have high appeal for first-time, young professionals, such as in Menlyn Maine in Pretoria, uMhlanga on the KZN North Coast, Somerset West in the Cape Winelands, Cape Town’s Western Seaboard and George on the Garden Route.
It follows that if a buyer purchases a home which meets demand from an emerging trend then they would tend to expect to enjoy good price growth – ultimately ensuring that their acquisition offered good value for money.
What aspects of a home do buyers place value on?
Says Sandra Gordon, Pam Golding Properties senior research analyst: “Some consider ‘value for money’ to mean a home which has many of the ‘added value’ features that a prospective homeowner wants and which are expensive and often time-consuming to install, such as a borehole, solar power, inverter/battery pack for use during Eskom load shedding, and good security features, to name a few. A home which includes these ticks many of the boxes for a given price. At the top end of the market features such as a swimming pool, wine cellar and wooden floors are a positive, while in the lower price brackets an upgraded kitchen or bathroom are priorities perceived to add value.
“However, with subdued house inflation and in the current buyers’ market, those wanting to sell their homes in the immediate future are advised not to overcapitalise on improvements which may only be recouped over many years.”
Gordon adds that, generally speaking, these are the key aspects which buyers place value on:
- Location – quality of local schools, employment opportunities, proximity to shops and entertainment, and ease of access to highways and public transport such as the Gautrain
- Home size and usable space – liveable space is what is most important to buyers and appraisers. Bedrooms and bathrooms are most highly valued, perhaps more so now that house sharing is becoming more common
- Age and condition – a newer home with new plumbing, electrical, roof and appliances can generate savings for a buyer and can add value to a home. Many buyers will pay a premium for a move-in-ready home.
- Upgrades and updates – the impact of an upgrade will depend on the kind of market segment (price band) the home is in and the existing home value. A swimming pool or wooden floors tend to have a greater impact for more expensive homes, while projects like a kitchen remodel or the addition of a full bathroom tend to have a bigger impact for less expensive homes.
As an interesting case study, and thinking out the box, Pam Golding Properties looked at two areas in different regions of the country which offer value for money – Oudtshoorn in the Western Cape’s Klein Karoo and Krugersdorp – just 30km from Johannesburg in Gauteng.
Comprising predominantly freehold homes, the 2020 median price (Source: Lightstone) in Oudtshoorn’s housing market was R820 000 for freehold and R770 000 for sectional title. While Oudtshoorn attracts a large number of retirees, recent purchasers are noticeably younger, including young adults and first-time home buyers.
Jacques de Beer, Pam Golding Properties area principal says: “We are currently marketing a number of properties which offer great value, including this (photograph attached) three-bedroom, two-bathroom home with garage in the best neighbourhood in Oudtshoorn, marketed at R1.167 million.
“We also have a number of properties priced under R1 million which offer great value, including a four-bedroom, one-bathroom home and a three-bedroom, one-bathroom home in a popular, older suburb – both priced at R699 000; a two-bedroom (both en-suite) Karoo sandstone character home with wooden floors and sash windows, situated in a good area selling for R780 000; a three-bedroom, one-bathroom original sandstone home centrally situated and priced at R799 000; and a three bedroom (all en-suite) home with garage and two-bedroom granny flat, also centrally situated and priced at R820 000.”
Adds de Beer: “With the low interest rate, we have seen higher demand among buyers and as a result, we expect prices to start rising. Coupled with this, our rental returns have increased over the last few years as rental properties have become scarce.”
In Krugersdorp too, the majority of homes are freehold, and much like Oudtshoorn, stable homeowners have an older age profile, while recent purchasers lean towards mainly middle-aged and young buyers. In Krugersdorp in 2020 freehold homes sold at a median price of R828 000, and sectional title R740 000. Also, as in Oudtshoorn, vacant plot sales have increased steadily over the past decade, suggesting continued demand for new housing.
Says Hannes Jansen van Vuuren, Pam Golding Properties area principal: “There is tremendous value to be had in Krugersdorp’s housing market. Currently in the brand-new Copperhill Estate development we are selling 165sqm, three-bedroom, 2.5-bathroom garden units with automated garage plus carport and patio for just R1.699 million, which includes transfer and bond costs. All the homes will be fibre and DSTV ready, making them ideal for a live-work-play lifestyle.”
Situated between green hills with views over the Cradle of Humankind, the luxury lifestyle estate is in the leafy suburb of Pinehaven with shopping centres, a state-of-the-art hospital and Silverstar Casino a stroll away. Spread over close to 9ha of prime land, when completed the estate will consist of 321 architecturally designed duplex homes and apartments. It will include a wide variety of amenities such as a multi-purpose clubhouse, pool pavilion, two swimming pools plus children’s play pool, braai pockets and a boma, outdoor gym area, indoor games room, jogging and walking paths and children’s playgrounds.
Posted by The Know - Pam Golding Properties