Property buying drops as consumers battle debt
PUBLISHED 5 OCT 2007


The latest economic data on debt levels in SA indicate that the property market is set to stabilise further.

So says Tony Clarke, Managing Director of Rawson Properties, who notes that recent data shows that the number of South Africans in arrears with their various repayments is increasing markedly.

"The number is the highest on record in the past four years. According to economists, we are only now seeing the full effect of the first interest rate hikes last year. We could, therefore, only see the full impact of the latest rises in the second quarter of 2008."

Clarke adds that another rate hike in October is very likely, as the cost of  fuel and food keeps rising and the inflation rate as yet shows no sign of stabilising.

"The impact of these price rises is most visible at the lower end of the market. Here property buyers are also finding it  ncreasingly difficult to qualify for their first home loan.

"Meanwhile existing property owners are finding that upgrading has also now become impossible, as they no longer qualify for the larger loans necessary to afford bigger homes.

" At the moment we find that there are far fewer buyers interested in any particular property than previously and we are noticing a drop in show house attendance.

"The stabilising trend is confirmed by the latest results from the financial institutions", says Clarke.

"The price of property in South Africa is determined by what buyers can afford. As soon as property becomes out of reach for the average South African, prices start stabilising."

According to the latest Standard Bank figures, year-on-year median house price growth in August was only 5,7%, compared to 10,4% in July. The ABSA
House Price Index, records a nominal year-on-year growth of 14,6% in August, compared to 15,1% in July.

"This clearly shows that we are now experiencing a buyers' market in South Africa," says Clarke.

"However, sellers who are repurchasing elsewhere should not be too concerned about putting their house on the market because they will get a good deal when they buy their next property - the buyers' market will work to their advantage."

And, he says, despite the tougher conditions now facing South African property buyers, there will "definitely not" be a decline in property prices.

 

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