Coronavirus and your home loan

Shaun Rademeyer, CEO of bond originator Multinet, is confident that banks will provide solutions for homeowners who will see their finances affected by the coronavirus pandemic.

He believes banks would want to prevent default payments by homeowners which can lead to the loss of their property, saying banks are eager to keep the economy going by providing responsible financing.

Better than 2008

“The banks are in a much better position compared to the global financial crisis in 2008.

“My recommendation to future homeowners is to use this social distancing period or lockdown to carry out all your market research; find their dream home; gather all the required documents and be prepared to make that offer,” suggests Rademeyer.

“This pandemic will come to an end eventually, and, as trends have shown, the property market will eventually recover. Many of our loan consultants are still receiving enquiries. Although we’ve seen a slight decrease in new applications, our applications pre-Covid-19 are still in process and we have seen very few drop-offs as yet.”

Slowdown expected

He does, however, expect a slowdown in the next coming weeks as a result of the pandemic and the national lockdown.

“The national lockdown will cause a dip, but it also allows the consumer to truly research and discuss their options going forward,” he suggests.

He further notes that the decision to purchase a property is not an impulsive one – it takes careful consideration of one’s personal finances, location and future requirements.

“Yes, we will more than likely see the coronavirus pandemic having an effect on the property market, but we must not forget that the process can take up to six months from the initial signing of the offer to the purchase and then to the registration of the property,” he adds.

He foresees the real impact of the pandemic on the residential property market will only be seen several months from now.
“We’ve already seen properties in Gauteng and KwaZulu-Natal being priced according to consumer demand. We also don’t foresee that these prices would be decreasing much further,” he says.

“However, we are noticing a steady reduction in the selling prices of the properties in the Western Cape and these prices will continue to decline.”

Carl Coetzee, CEO of BetterBond, says property tends to be a far more resilient investment type than many others.

“In recent days we’ve seen equities being significantly affected, while property has remained fairly stable,” he says.

“Earlier this month, CNBC reported that residential real estate in the US appeared to offer investors the calm they were looking for in the coronavirus storm.”

That is why, he explains, traditionally, property is less volatile than the stock market and has a high tangible asset value.

“Irrespective of the impact the virus has on society, people will still need accommodation, which offers a measure of security in terms of a property investment holding ground in times of turmoil,” says Coetzee.

“What’s more, property is an asset class with supreme resilience and a unique ability to ‘bounce back’ as market conditions improve.”

In his view, the prevailing buyer’s market conditions are further reasons to not shy away from property investments in the time of Covid-19.

Buyer’s market

A buyer’s market occurs where the supply of property exceeds the demand for property. It bodes well for those looking to purchase property since prices are generally lower in this type of market.

“Add to that the threshold on transfer duty was raised to R1 million recently, meaning that transfer duty costs are lower for buyers; and that it is interest rate dropped by 100 basis points last week, and it is a good time for investors to remain at least slightly positive about the immediate future of property,” says Coetzee.

“Our advice is to ensure that you buy at the right price, that your affordability is in order and that you don’t extend yourself too much when acquiring a new property.”

Putting down a deposit is always a good idea and might mean that you can get a better interest rate on your bond.

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