PROPERTY: Rocky Road Ahead for the Real Estate Market
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Ahead of the Monetary Policy Committee meeting on interest rates and responding to the prevailing global economic uncertainty and the SARB Quarterly Bulletin data quoted by FNB to the effect that there has been a year-on-year decline in the value of home loans granted as at the second quarter of this year, Seeff chairman, Samuel Seeff says there is a rocky road ahead for the real estate market.
While a cut in the repo rate will certainly help affordability, he says that this is unlikely to make any significant impact on real estate sales volumes and cycles which are at a 30-year low. The only residential properties that are showing any significant movement right now, are homes priced below R1,2 million he says. The lower and middle income market sectors are also the only real estate that has shown any meaningful price growth this year. This, he adds is impacting a significant slice of the market, although he says that property prices in the upper income and luxury markets seem to be settling down, but he says mostly at levels last seen in 2004.
Low Confidence in Real Estate Market
Investor confidence remains low he says and consequently investment properties are showing very little movement. This sector is generally unaffected by the levels of mortgage credit granting as these are cash transactions. The fact that investors are unable to resell properties at any meaningful capital growth in the current market, he continues has softened their appetite for participation in the market. This, he adds despite the fact that investment properties currently on the market are offering steep discounts.
Real Estate Market Deals with Tough Conditions
Real estate professionals continue to operate under tough trading conditions he says. The country’s economic growth forecast is down to 3,3 percent from its original prediction of 3,6 percent. The recovery of the real estate market will need to be domestic-led he says, that is, driven by the recovery of the domestic economy. High unemployment levels and rising living and utility costs mitigate FNB’s report that household debt-to-disposable income ratios have improved, he says.
Our agents report that buyers are willing, but the continued tight bank mortgage lending criteria remains a major stumbling block. Buyers are driving a hard bargain and the average time to conclude a sale is taking up to five months; simply not enough for any meaningful movement in the real estate market, he concludes.
Business News Sector Tags: Property|