Guiding consumers since 2009

Is it time to get into the property market?

By Staff Writer

13 February 2008

From Tycoon.co.za

by Geoff Candy

Property strategist, John Loos, told the Moneyweb Power Hour last
night, "I think towards the middle of the year, given our humble
opinion that interest rates will now move sideways for most of the
year, I expect to see a gradual uptick in demand for residential
property towards the middle of the year. That's how I see the cycle.
So I don't think we're far from the bottom, but still a little bit
of pain and suffering to go."

This sentiment was echoed by Absa property economist Jacques du Toit,
who told the Moneyweb Power Hour, "It's turning into a buyer's
market - maybe not completely, but it is much more of a buyer's
market compared to a year or two ago, when price growth was still
20%, around about there."

Asked what advice he would give to first time buyers, Loos
said: "I don't think one should probably wait much longer. If one's
holding out for price deflation I think you're probably going to be
disappointed."

But, he added, "I think really now is a time when you keep your ear
to the ground and you hunt around and you look for a rather over-
extended seller who might be desperate to sell, and who does drop
his price. But for the market as a whole it's what I call a relative
window of opportunity because you can find the odd desperate seller,
but I don't think it's a situation where we're going to see price
deflation on a significant scale."

As to the effect of the National Credit Act, the FNB Barometer
indicates that while is it is currently having a significant effect,
as estate agents get more and more used to it, the effects will start
tapering off toward the end of 2008.

But, Loos says, it is the lower income groups that are being affected by the Act now.

"There's an affordability calculation coming into play now. It's not
just the standard sort of repayment to income any more. They look at everything. And what's been happening in recent years is that low-income groups - I think it's still the case - are being hit. They
have effectively a higher consumer-price inflation rate than do the higher income groups."

Du Toit adds that one of the major effects of the NCA is it has changed the level of what people can afford.

"We also feel that a lot of the focus in the market has shifted away from your larger, more expensive properties to the middle segment, and even to the more affordable segment. And, taking into account that affordability will remain important, people will most probably have to look at smaller, more affordable high-density properties in future."

Asked about the impact of the electricity, both Loos and du Toit,
maintain it will have a negative effect on new developments but that it is too early to tell what the full impact will be.

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