Middle Class Cape Property Woes - 02-26-09

February 26 - Whether you're a buyer or a seller in Cape Town's middle class suburbs, and unless you have cash in hand,  it may not be the best time to be in the property market right now. That is the opinion expressed by market analysts, you have noted that on the one hand negative equity on property value is on the upswing, and on the other hand it is becoming increasingly difficult to enter these markets due to tight lending restrictions.

Property owners who bought in the last three years and are now forced to sell because they cannot keep up with bond repayments in middle class suburbs, may be shocked to find that they are experiencing negative equity - that is, they owe more to the banks than the house is currently worth.

Many homeowners have spent their hard earned money slowly improving their properties over the years and they expect to at least get their investment value back when selling their homes. Unfortunately, with some Cape areas experiencing a drop in home values translated into R100,000 to R150,000, this is not always possible.

But while home prices are rock bottom, those seeking to enter the property market are hit with a brick wall when it comes to home loan applications. While a typical home in popular middle class areas such as Grassy Park may costs around R700,000 today, first time buyers who require a bond of at least R500,000 will find the banks are not so quick to grant them a home loan. For one, these homebuyers will need to earn between R30,000 and R40,000 a month for the banks to consider them a 'safe bet' - not an easy feat in today's economy.

Most of these potential buyers are waiting patiently in the wings, renting for longer and hoping that the situation will improve. In the meantime, buyers with cash are snapping up the true bargains and taking advantage of the demand for rented accommodation.