Guiding consumers since 2009

Homeowners set lower asking prices

By Staff Writer

From Property 24

25 April 2008

In its first quarter review road show to financial institutions and
property funds, the Alliance Group has confirmed that the residential
property market has cooled off across the board including the very top
end of the market, which has been impervious to market changes and
interest rate fluctuations.

The market above R15m and below R500k seem to be having the least impact, "but they are certainly not immune to local and international value
repricing," explains chief executive, Rael Levitt.

The newly appointed Alliance research department picked up the property
slowdown in the third quarter of 2007 through decreased bidding activity
on its auction floors.

"There is no doubt that sellers are rapidly becoming far more flexible
and realistic due to a flood of stock hitting the market with less and
less buyer uptake", explains Levitt.

"It's a classic case of supply exceeding demand and despite South African
residential real estate experiencing growth of 300% in a relatively short
time frame, reality is now dawning on homeowners that values don't only go
upwards but are in fact now decreasing."

"For struggling homeowners and their financiers this presents a real problem,
particularly to home loans granted in 2007 where there are now signs of
negative equity emerging, which may be widespread", says Levitt.

Alliance is cautioning banks that property valuations conducted in 2007
should be treated with great caution and not fully relied on when assessing
their asset based securities.

"We are far away from the 2001 period where certain properties had negative
equity of up to 20%, but for the first time in six years a flat and now a
decelerating market is putting pressure on new homeowners who are getting
caught in a debt trap where they cannot quickly sell and settle their full
outstanding mortgage bond debt".

 

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