Now is the time for investors and property buyers looking for newly constructed properties to purchase greenfield developments. As from here on out, it is going to get significantly more expensive due to soaring raw material prices. This is according to Chris Renecle, the MD at Renprop, a Johannesburg based developer and rental manager.

“On new builds or future builds there will be an inflationary increase so buy now at current prices. In the coming years, you will be paying significantly inflated prices,” says Renecle. He adds that more and more inflationary pressure is going to be brought to bear on new residential property builds in the future thanks to much higher input costs due to the fallout around the Covid-19 pandemic.

“Construction prices have already increased dramatically with raw materials prices, such as concrete and steel, all on the up. In fact steel prices have gone up some 50% in the last year, despite demand for new builds in the residential market being generally low,” says Renecle.

According to the CRB Commodities Index1, steel rebar prices were 60% higher on May 12, 2021, than they were the same time last year. They were sitting nearly 30% higher on June 27, compared with last year.

American-British information provider, IHS Markit2 predicts that steel prices will remain elevated and supply chain disruptions will delay price declines into the second half of 2021. Steel of course is just one of the raw materials that is expected to come under increasing inflationary pressure.

Renecle says there is also a shortage of bricks, aluminium, and glass because of production slowdowns due to the Covid-19 pandemic. All of this creates a price premium with the costing of all recent development tenders for Renprop being considerably higher than they were previously.

Mining vs construction

Another problem for the construction sector is that it is competing with the mining industry for raw materials such as steel.

The mining sector, which is experiencing a boom at the moment, is snapping up all the available steel that comes to market, while at the same time there has not been enough local steel production to keep up with the demand.

While there has been little activity as far as new developments in the general commercial property sector is concerned, residential real estate is still experiencing pockets of demand. 

“But even though demand isn’t where it should be at the moment, this won’t keep prices from rising,” explains Renecle.

His advice to those wanting to get into the residential market is to do so while they still can. This is particularly true for those wanting to purchase investment properties as expected higher prices are going to eat into any potential future returns.

As it stands, Renecle says the properties that are best placed at the moment to provide strong rental returns for investors are those priced between R800,000 and R1m, particularly two-bedroom, one-bathroom apartments with open planning living.

Renecle says this price range is the sweet spot at the moment, based on rental demand and generally provides the strongest rentals for investors.

New developments

Renprop, which recently introduced a rental guarantee product that delivers an 8% net return to investors that beats money markets, says there is healthy demand at two of its new developments, which are both in the R800,000 to R1m price range.

These include Fern Valley Apartments in Ferndale, which borders Bryanston, where two-bedroom units are selling from R799,000 and Brooke Manor in Rivonia, where the group is selling two-bedroom units from R979,000.

“Both new developments have rental guarantees in place, which offer comfort to investors in difficult times. This means the developer guarantees a rental income for an investor buying a property. Typically this is set between 6-12 months depending on the value of the property and mitigates the risk for investors wanting to enter the buy to let market.  At the same time investors do not have the hassle of finding their own tenants with Renprop securing them and making sure investors earn rental income from day one after transfer,” concludes Renecle.

References:

1. https://tradingeconomics.com/commodity/steel
2. https://ihsmarkit.com/solutions/steel-forecast.html

**Title: The Valuable Role of Real Estate Agents in Property Transactions**

Introduction:

In the dynamic world of real estate, the role of a real estate agent extends far beyond the time they spend with the homeowner. On average, for every hour a real estate agent interacts with a seller, they dedicate approximately nine hours working diligently behind the scenes. This level of commitment is driven by the fact that agents operate on a commission basis, meaning their payment is contingent upon successfully closing a sale. In this article, we will delve into the essential tasks performed by real estate agents and shed light on their invaluable contributions to property transactions.

Market the property effectively:

Real estate agents invest significant resources into maximizing the exposure of their listings. They employ various marketing strategies, such as placing advertisements in magazines and newspapers, printing flyers and brochures, capturing professional photographs of the property, and securing prominent placement on popular property search portals. Furthermore, they leverage the services of public relations officers to engage with targeted media, harness the power of social media platforms to showcase listings, and organize show days to attract potential buyers. These efforts ensure that the property receives extensive visibility and reaches a wide audience.

Facilitate buyer interactions and negotiations:

A substantial portion of an agent's time revolves around establishing connections with potential buyers and understanding their specific requirements. Agents must possess an in-depth knowledge of the properties they are marketing to effectively match buyers with suitable homes. Once a potential match is identified, the agent plays a pivotal role in managing offers and counteroffers. Skilled negotiation during this stage can yield significant financial benefits for sellers, as agents have the expertise to navigate complex negotiations and secure favorable terms.

Thorough research for informed decisions:

Real estate agents dedicate considerable time to researching property sales data and market trends to stay informed and provide accurate insights. By conducting comprehensive comparative market analyses (CMAs), agents can determine an optimal price range for a property. This analysis incorporates factors such as the average price per square meter in the area, recent sale prices of similar properties, and the prices of comparable properties currently on the market. This thorough research empowers agents to price a home competitively and attract potential buyers.

Attendance at inspections:

While homeowners may not always be present during home inspections, a reliable agent will be there. Attending inspections enables agents to gather vital information about the property, allowing them to better assess its value and establish an appropriate asking price. This firsthand knowledge gained during inspections bolsters their ability to represent the seller's interests effectively.

Ensuring a smooth transaction:

Real estate transactions can be complex and emotionally charged, leading to potential complications. However, experienced agents endeavor to shield clients from unnecessary stress and drama. Agents work tirelessly behind the scenes to streamline the sales process, proactively addressing any issues that arise. Their problem-solving skills, positive approach, and commitment to finding constructive solutions contribute to a smoother experience for all parties involved.

Collaboration with fellow agents:

Real estate agents maintain extensive networks with other professionals in the industry. They frequently collaborate with their peers to match buyers with suitable properties. In cases where a particular agent does not have a property that meets a buyer's requirements, they willingly refer the buyer to another agent who can better fulfill their needs. This cooperative approach ensures that clients receive optimal service and increases the chances of successful transactions.

Conclusion:

Real estate agents play a crucial role in property transactions, dedicating numerous hours behind the scenes to serve their clients effectively. From comprehensive marketing efforts to skillful negotiation, meticulous research, attending inspections, and ensuring a smooth process, agents provide invaluable support at every stage of a sale. Their expertise, commitment, and extensive networks add significant value to property transactions. For professional assistance with buying or selling properties, reach out to Morné Prinsloo at RE/MAX MASTERS