Tentative signs of recovery?

The end may still be a year away, but positive signs in the past quarter indicate the property market is making a tentative shift towards recovery, Bond Choice MD sales Kevin Mountjoy says.

Considering statistics in the three months to June, Mountjoy says the banks are converting 7-9% more applications into loans reflecting “a selective” return to the home loan market by the financial institutions. There were also indications that the JSE futures rates were showing signs of softening.

The move was in response to the 500 basis point cut in the prime interest rates since December, broadening the scope for people seeking bond applications.

Property prices have also dipped dramatically year-on-year in the first two quarters, adding weight to claims of value purchases in the property market for consumers with sufficient cash reserves to match the 20-30% deposits required by the banks.

“The banks are opening the channels in some areas, showing marginally less risk aversion, and that translates into good news for consumers seeking out home loans or wanting to get into the property market,” he says.

Mountjoy believes political pressure in the light of the recession may force newly-appointed Reserve Bank governor Gill Marcus to lower the repo rate by another 50-100 basis points before December. This will add further impetus to the property market, potentially providing the boost to consumer spending that will kick start the economy out of the recession.

“The relatively little movement in the JSE and the rand reflected that Marcus’s appointment was well-received by the market, which in itself is in a better position now than at the end of March. This trend will continue throughout the year and consumers can anticipate significant improvements to escalate from 2010,” Mountjoy says.