BUY A HOUSE WHILE BARGAINS LAST

2009/09/23 08:04:00 PM
Svetlana Doneva
Johannesburg - South Africans looking for property bargains in the residential market should strike while the iron is hot, according to FNB Home Loans property strategist John Loos.
"It's a relatively good time to buy. Although things are turning for the better, there is a high level of financial stress selling and that is where the opportunistic buyer can cash in," said Loos, speaking to Chris Gibbons on Fin24.com's podcast AM Stock Take on Wednesday.
Loos added that another reason why South Africans may want to have a look at the residential market is because the economy is at the bottom of the interest rate cycle - or very close to it.
The South African Reserve Bank's Monetary Policy Committee (MPC) left the key repo rate unchanged at 7% at their September meeting. The prime lending and mortgage rates are also steady at 10.5%.
The market consensus is that there will be no more major rate cuts this year. The MPC has cut rates by a collective 500 basis points since December 2008.
The local residential market is currently in a deflationary mode. House prices fell 3.4% in August 2009, compared to the same month last year and a 3.7% year-on-year drop in July, according to Absa Home Loans calculations.
However, property economists see house price inflation returning next year.
"Oversupply will be mopped up in the second half of the year and then house price inflation can resume in 2010 with moderate single digit inflation," said Loos, adding that there will be "no fireworks in the recovery".
Jacques du Toit, senior property analyst at Absa Home Loans, saw nominal house price growth of just under 3% over the course of next year.
Meanwhile Dr Andrew Golding, CEO of the Pam Golding Property group, said that lending institutions will need to relax their lending criteria in order to breathe some life into the market place.
"Unquestionably, the reduced availability to finance is the single biggest factor holding back the housing market now," said Golding.
- Fin24.com