Buy Second Hand - 03-05-09

February 5 - Buyers looking to enter the property market right now, may want to consider the fact that, at present, second hand homes are around 25% cheaper than brand new ones.

The rising costs of building and construction means that today it makes financial sense to invest in a home that has been lived in for a few years, rather than purchase a new one.

The Chief Executive Officer of Greeff Properties, Mike Greeff explained this phenomenon. "Figures relating to house price increases vary depending on which authority you consult," he said, "but most would agree that the price rises were in the order of 25% in 2006, 20% in 2007, with a leveling off taking place in the second quarter of 2007."

Seeff then compared these figures with those relating to the cost of building new homes in South Africa. In 2006, building costs rose 40%, 24% in 2007 and 14% in 2008.

Seeff said the bottom line, right now, is that it is almost always less expensive to buy a second hand home compared to a new one.

The CEO gave Constantia in the Cape as an example of these price differences. "Right now, buyers are able to get an Upper Constantia home in the R6 million to R15 million bracket at R10,000 to R12,000/sqm," he said. "These same homes built under current conditions could not be built at less than R16,000 to R18,000/sqm."

The rising costs in the construction industry were blamed squarely on the rise in the price of materials such as cement, bricks, timber and steel. Building companies could still manage to keep their prices up because of the heavy construction work they had in terms of building infrastructure for the World Cup 2010 football event, as well as the Gautrain.

However, Greeff believes that 2010 will be a turning point in the industry, and that the 25% par would level out significantly.