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Make a move towards luxury - 2014-01-10

Although prices are climbing at the top end of the real estate market, there’s still time for homeowners who have been contemplating a move to a luxury property to make the transition, says Jan Davel, MD of the RealNet estate agency group.

There are two major factors currently operating in favour of such upgraders, he says, the first of them being that prices in the middle segment of the market are rising faster than those in the luxury sector.

According to the latest Absa housing review, middle segment prices showed an average year-on-year increase of 9,3% in the third quarter of 2013 – with the large home sub-segment achieving an average year-on-year increase of 8,4%, and much more in every region except the Free State and Limpopo.

At the same time, Davel says, prices in the luxury home sector, starting at R3,8m, achieved an average year-on-year increase of only 7,3%, and the differential means that there are good opportunities for the astute homeowner to “trade up”.

Meanwhile, the huge differential between the cost of newly-built homes and that of similar pre-owned homes is also in favour of those who aspire to own a luxury property in any one of SA’s gracious heritage suburbs, he notes.

“The Absa report shows that it is currently as much as 37% more expensive to buy a newly-built home than it is to buy a similar, pre-owned home and this creates a margin for renovation and modernization of older luxury homes without overcapitalizing.

“In the case of a 500sqm pre-owned home in an upmarket suburb that costs R3,8m, for example, one can subtract about R1,2m for the land value, so the actual cost of the home would be R5200/ sqm.

“This compares very well with the R8000 to R12 000/sqm that developers and builders are currently quoting for newly-built luxury homes in sought-after suburbs and estates, and gives the buyer room to spend at least another R1000/sqm on upgrading the property and perhaps improving the security without exceeding a market-related limit for the area.”

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