Homeowners feeling down

By Staff Writer

By Xolile Bhengu

There is no good news for homeowners desperate to sell their houses as the latest house price survey shows a dip that has not been seen since 1999.

Furthermore, if you have put your house up for sale, you can expect to get as much as 40 percent less than your initial asking price by the end of this year.

The residential property sector is continually showing a deflated bubble from the previous property bubble boom.

Absa Bank’s House Price Index for May released yesterday recorded single digit year-on-year nominal growth of 4.3 percent last month, down 1.2 percent from 5.5percent in April — the slowest house price growth in nine years.

The average price of a middle- segment house dipped to about R960700 in May, from the average of R974 000 in April.

The Absa index is based on the total purchase price of houses in the 80m² to 400m² size category, valued at R2.9-million or less last year , including home improvements, for which loan applications were approved .

The bank expected the SA Reserve Bank’s Monetary Policy Committee to introduce a 100 basis interest rate next week, with potentially further rate hikes if the CPIX (inflation excluding mortgage costs) remained ‘‘stubbornly high.”

Absa property analyst Jacques du Toit said there were more people selling their homes than there were buyers as broad negative economic conditions started to show their effects on people’s affordability levels.

‘‘We anticipate and expect property repossessions to pick up, but coming from a low base. The repossessions would not be isolated to a particular market segment; it would affect virtually all segments of the residential property market.

‘‘The increase of stock in the market is a reflection of the financial difficulties that people are going through,” Du Toit said.

Head of Lew Geffen Sotheby’s International Realty Lew Geffen, in a letter to his agents, said this week he had advised a relative to drop his price by 25 percent in order to get a quick sale, and advised agents to tell their clients to do the same.

He said: ‘‘It’s a question of being truthful to your clients to save them severe pain by procrastinating and not accepting the offer today. Today’s low offer is tomorrow’s miracle price. This market is not going to recover any time soon.”

Geffen said his thoughts were that the property market would come down by a significant 40 percent from the highs of 2007, adding that there were already 60 percent fewer buyers on the market today, compared with the same time last year. He said the bank requirement of five percent and up to 25 percent equity for property purchases ranging more than R800, 000 to R4-million — indicated strongly that they had factored that the market would drop another 25 percent on top of the current estimated 15 percent decline.

‘‘Take into account that today a man who wants to purchase a R2-million property, which is the average selling price in our company, will have to earn more than R87000 gross per month in order to qualify; and if the market drops by 25 percent that same person will need to earn R65200 gross, which is also no picnic.”

The Tenant Profile Network (TPN), a registered credit bureau that offers tenant rental payment profiles for property managers and landlords, said it had seen an increase in demand for rentals compared to a year ago.

Michelle Dickens, managing director for TPN, said the company had seen the beginning of a trend of a preference for a tenant six-month versus a twelve-month-lease period, to increase rentals and meet their mortgage repayments.

She said that nationally rentals were up, averaging at R4000.

The company had also seen an increase of properties initially put up for sale being put up for rental to cushion the longer period of waiting for a purchase.

‘‘Demand for rental property is far outstripping market availability. Estate agents are now at the reverse effect of a property sales boom, and are sitting with an over- supply of stock,” said Dickens.

The Alliance Group was reported to have a countrywide 1000 houses up for sale from execution, repossession and insolvency.

It expected thousands of families to lose their homes by the end of the third quarter of the year. — Additional reporting from Simpiwe Piliso

Recent Articles

Featured Which one should you get first: life cover or a retirement annuity?

Financial planning can be a brain-racking process because it means making difficult decisions such as choosing the most suitable products for you. The one challenge faced by those who are financially constrained is which product to choose: life cover or a retirement annuity (RA).

Read more

Should you save or invest your money?

While saving means putting away cash for future use, investment involves purchasing assets which will yield good returns in the future.

Read more

Retirement annuities compared – pick the one for you

When selecting an RA you must know the type of annuity you are investing in. Retirement annuities are divided into two categories: traditional and new generation annuities.

Read more

Recent tax changes – how do they affect you?

In January this year, various amendments to the Taxation Laws Amendment Bill and the Tax Administration Act were announced. While some changes will benefit you, others could be to your disadvantage. Justmoney looks at how some of the recent changes will impact you.

Read more

Sign Up

To our weekly newsletter for advice you can bank on

Deals

Save R100 when you buy a tracker at Takealot

Price: R289
When: Daily
Where: Online

Pamper yourself and partner for less at Bakwena Day Spa

Price: From R999
When: Until 31 July
Where: Hartbeespoort

Pay only R35 for the new Nandos Boujee Bowl

Price: R35
When: Daily
Where: Nationwide