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Monday Nov 14, 2011

Market 'not likely to turn for months'

Reacting to the latest housing data, Seeff chairman Samuel Seeff says he remains upbeat - but cautions that recovery of the property market will take longer than expected.

"Following the robust pre-2007 levels, there have been more than four years of slowed activity and market adjustment," he says.

"As with all markets, property is cyclical, and I believe we are now near the bottom of the curve and that prices and sales volumes are likely to ebb for at least the next 18 months before any noteworthy uptick. This would however, need to be driven by an economic pick-up, under pinned by positive employment growth.

"Because of significantly fewer new developments and new stock being built there is likely to be a stock shortage once the market turns."

He says the number of distressed properties continues to weigh on the performance of the market, and that normal activity levels can be expected to return only once there is a significant clearance of these.

On the upside, Seeff believes banks' deposit requirements will help bring more stability to the market in the long term. When home owners have some of their own money invested in their homes, they generally work harder to keep up their mortgage payments. This will enable owners to better withstand some of the updown effects characterised during this downswing and will result in fewer foreclosures.

The exception, he says should be first-time home-buyers, where he would encourage the introduction of a formalised policy that enables them to acquire 100 percent bonds.

There are still keen buyers in the market, but sellers need to be mindful of what buyers are prepared to pay and price correctly if they hope to sell their properties.

Buyers are negotiating strongly and on their terms. The upshot, he says, is that because of the slow turnover, there is real value to be gained at the top end of the market.

"Now is indeed a good time to buy, but buyers should be aware that these conditions are unlikely to continue indefinitely," says Seeff.

Dianne Brock, general manager of the Western Cape Institute of Estate Agents, says she is often asked to predict what direction the residential property market will take next.

"Right now Propstats data shows that that the traditional seasonal upswing is again a reality: spring always brings with it a new crop of house buyers and this year there has been increased activity, particularly in the entry level to R1.5 million bracket," she says.

"The more expensive homes are still difficult to sell, especially as so many of their owners, despite extensive media coverage on the subject, have not accepted today's lower market prices."

Looking at the bigger picture, Brock says that after attending several sessions on the state of the market, she agrees with economists like John Loos of FNB, who say there will be no significant upturn in house prices for three years.

"Here again, however, there are figures which indicate that the worst may now be over. Although growth may be insignificant, I think the likelihood of a further big drop in prices can be discounted. With national house price increases at 5.1 percent, prices are more or less holding steady against inflation. This suggests that now could be a good time to buy."

From the estate agents' viewpoint, Brock says the current scenario is quite promising because, with the total number of registered agents reduced from 86 000 to 25 000, competent agents are finding they can maintain a reasonable turnover.

"In many instances, competent, professional agents are now selling more units than they did in the boom times, but they have to work harder for them."

Weekend Argus (Saturday Edition)


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