'Don't sell SA homes, Caprice!'

Johannesburg - Interger Home Loans CEO Simon Stockley has told international swimwear model-turned-businesswoman Caprice that she shouldn't get her bikini in a twist over the local property market.

Stockley was reacting to an article in which Caprice lamented the falling value of her extensive global property portfolio in a that appeared in British newspaper the Daily Mail.

"You are selling at the worst possible time, just as the market is starting to turn - it's a bit like launching a swimwear range in the middle of a snowstorm. Wait for the summer, it always follows winter if you are patient," said Stockley in an open letter, urging Caprice - and SA homeowners - to hold onto their homes.

Stockley urged her to explore the value in the property market and see South Africa as a solid investment opportunity.

The article stated that Caprice's investment in her Bryanston, Johannesburg home - which is on the market for R5.3m - would have lost nearly £250,000 through the currency fluctuation alone had she taken out a home loan on the property (she paid cash). "Factor in a 20-25% slump in house prices and the value of her investment has nearly halved," the article states.

With the latest interest rate cut and the possibility of more to come, the property market looks set to recover. "The 150 basis-point cut in rates since December last year not only means the South Africans have more cash in their pockets, but - more importantly - they feel better about themselves and the whole economic cycle.

"I expect the market to start to turn," said Stockley. "We can realistically see an uptick in real-estate prices by the middle of 2009."

Along with these interest rate cuts, the 2010 Fifa World Cup will drive positive sentiment in the market, increase public spending on infrastructure and push consumer prices higher, compensating for the decline in the value of the rand. This will stimulate the entire economy, including the property sector.

Here's how to cope

If Caprice or other South African homeowners have limited budgets, Stockley suggests using an equity-release product, which enables a borrower to access the equity built up in their property to refinance their short-term expensive debt.

Basically, this allows you to increase your home loan and use that money to pay off other debt. Once your cash flow improves, you can begin to repay your new mortgage. Say, for example, you purchased your house five years ago for R500 000 and took out a mortgage of R400 000.

Chances are the property - even in today's depressed market - would be worth about R650 000; so, you could increase your mortgage (that is, refinance a portion of the equity) to fund short-term debt and pay it back when the cash flow improved.

"South African real estate (particularly in the Western Cape) has outperformed the UK real estate market over the last 18 months and showed real resilience in the face of global financial turmoil," said Stockley.

"The fundamental difference is that there is still a shortage of quality stock in the South Africa as opposed to the speculative oversupply in the UK and USA.

"The other important difference is that the recession has not been as deep, meaning fewer people have lost their jobs resulting in fewer bank repossessions."

"We remain a solid investment opportunity but, more importantly, a great place to visit and do business," said Stockley.

- Fin24.com