But the general situation still looks pretty dismal for home owners and potential property investors, so we asked some smart and savvy types if there the dark cloud hanging over property has a silver lining. Simon Stockley, CEO of Interger is hopeful. He says that SA has probably hit the bottom of the barrel in the property market and that while house prices have been in decline, we are about to enter a period of stability. According to Stockley, there are good signs of recovery. “Investors are looking for value and are cautiously reentering the market”. Stockley’s advice to home owners is to take whatever cash or access to funding that they might have and look for bargains. He says that sellers have been forced to adjust their pricing expectations to more reasonable levels and this is great news for buyers. For those home owners who are holding on by a thread, Stockley’s advice is to hold on a little tighter. “Hang in there – there is light at the end of the tunnel. In this market you need to consider property over the medium to long term”. Economist from the Efficient Group, Doret Els believes there are both negatives and positives to the latest interest rate. “What’s concerning is the zero real repo rate that the country is now faced with. This means that there are no returns on savings because these will be eaten up by inflation”. Els says that if inflation doesn’t change, South Africans are in an even sticker situation. On the up side, Els believes that this rate cut is positive for the property sector. “Things are on the up for potential homeowners. Banks are still applying stringent lending criteria but if you can get a deposit together then now is the time to get into the property market. Andrew Watt from property research house Lightstone is sober about this cut. He believes that this interest cut should help reduce the probability of a severe economic downturn in our economy. But, he adds that it’s not entirely clear how much the global economic crisis has filtered through to the South African economy and as a result whether interest rates cuts will be sufficient to turn the economy around. Watt thinks that more relief needs to be given to our already highly indebted households. “Despite this rate cut, consumers are struggling in the current market.” Watt says that from a property perspective he doesn’t believe that this interest rate cut will have a significant impact on the transaction volumes and house prices in the short term. “With many consumers having already fallen into arrears on credit agreement I think that it’s going to take some time before the demand for housing picks up. There is excess supply in the market – especially from distressed sales. So I think house prices will continue to fall for the rest of the year.” One segment of the market that Watt is holding out hope for is the affordable market for properties under R250k. “We expect demand for new properties in this segment to remain relatively strong and there is still appetite from banks and other lenders to provide financing to this group in the market.” Lightstone’s predictions for the market for the rest of the year are interesting. According to their latest Repeat Sales Index, annual house prices inflation has dropped to -2.4% in December based on Deeds Office transactions. “Extrapolating this forward to March based on mortgage applications during the interim period shows that house price inflation dropped further to -4.0% in March. Looking at the trend, we expect house price inflation to continue to drop and probably reach -10% by the end of the year. Unfortunately we also believe the risk is on the downside and that it is possible that prices could drop even further than this, particularly in highly indebted segments of the market”. Oh dear. Watt might be biased but he recommends that consumers who want to make the wisest property decisions around should look at Lightstone’s website and make use of their nifty tools like the Automated Valuation Report (AVR). The AVR allows potential buyers to download a valuation report of any residential property in SA. “We have found that this is particularly helpful to users looking to value a property if they are thinking of buying or selling, checking their property value for rates purposes or merely getting an idea as to how well their property investment has performed. In addition, one can also get a suburb report that looks at suburb level property information such as sales activity, average prices, profile of owners/buyers/sellers and ranking of the suburb against other suburbs in terms of average values”. Gary Peterson, The Bond Man, says rates are expected to come down by a further 2,5% this year, implying accumulated rate cuts of 5% from the top of the interest rate cycle. He says the latest rate cuts don’t appear to have improved bank appetite for risk, yet. “But banks don’t have a standardized lending policy and a client may qualify for a much higher bond at one bank than at another. This is why it's more important than ever to entrust your bond requirements to a mortgage originator with a good track record of securing the most competitive deals.” Peterson says he’s also hopeful. “The phones have started ringing and I am running ragged with clients again, all applying to be pre-approved for bonds. It's not quite like old times, but there is undoubtedly a growing number of prospective buyers out there who are determined to get in on the act before the market starts its upward cycle towards the end of this year.” |
Property Advice