PROPERTY WON'T GET MUCH CHEAPER

Sapa
01 September 2009

More signs of a house price recovery - bank stats

House price growth was likely to improve towards the end of the year as the effect of interest rate cuts impacted on the economy and the property market, the Standard Bank said on Tuesday.
It was releasing its latest residential property gauge.
The bank said growth in its median house price index decreased by 5.2 percent year-on-year in August, averaging 3.9 percent year-on-year in the first eight months of 2009.
"Important drivers of overall growth in the economy, such as the level of household income and debt, as well as the medium-term economic and financial outlook, are such that a quick turnaround in the housing market is unlikely," Standard Bank said.
"The best that we can hope for is for price declines to stabilise towards the end of the year as the recent interest rate cuts work their way through the economy and overall consumer and business sentiment improves."
It said that the potent mix of industry-wide loan-to-value restrictions, negative income growth and concerns about job security would weigh on the property market.
Furthermore, in the short-term, any easing in credit-granting criteria would be mild, as upside risks regarding uncertainty in job security and income growth continued.
Standard Bank said the cumulative interest rate cuts that commenced in December 2008 would still have to filter fully through the economy.
"The full impact of interest rate cuts on economic growth could take as long as 12 to 18 months, implying that it may be too early to expect substantial economic growth this year," Standard Bank said.
In the short term, the economic outlook was expected to remain lacklustre.
However, relatively positive developments on the inflation front, the global economy and the full impact of lower interest rates would support the property market in time to come, the bank said.
It was anticipated that house price growth would be negative over the short to medium term, but was likely to improve towards the end of the year.