House price recovery ahead

Elma Kloppers, Beeld

17 April 2008

Despite various unusual factors that together have contributed to the
extremely difficult market circumstances, Pam Golding Properties (PGP)
chief executive Andrew Golding believes the local property market will
survive the storm.

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"People forget, but in 1998 the house market was in a similar position when
interest rates reached 25%." A seven-year boom market followed shortly
afterwards.

He said the property market was largely driven by sentiment, which would be
a key factor in the future welfare of the industry.

Sentiment is taking a knock now because of worldwide fears of a recession
amid the sub-prime crisis in the US and the sky-high international oil price.

On the national front it was being influenced by rising interest rates,
political uncertainty and the Eskom crisis.

The Credit Act had also had a meaningful impact on banks' capacity to lend
money, which hurt the property market.

Consequently, sales volumes were between 20% and 30% lower.

Even though buyers were now in a position to negotiate a more realistic price
with sellers, he did not foresee "massive sales".

Some buyers will pay R60m

But while the broader market was affected, he said that houses of more than
R15m were in an unusual position and were surprising with continued price
growth.

"To pay R40 000/m² for a new house Cape Town and Gauteng is not strange
anymore," he said.

Buyers in this category are prepared to pay R60m for a property because they
are relatively unaffected by rising interest rates.