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Wednesday Jun 20, 2012

Steady growth provides opportunities for investors

After three years of recession-induced sluggishness, the property market appears to be showing signs of recovery, aided largely by increasing confidence from the government and banks.

This is according to Dawie Verryne, chief executive of Korbitec, which specialises in software solutions and development for property professionals and consumers.

"Although the market's recovery is likely to be slow and painstaking, the consensus seems to be that the worst is now over and fears of a doubledip recession have largely dissipated," he says.

"Consumers continue to be hampered by bad credit records and high debt-to-disposableincome ratios, but their interest in property has not waned. The increasing prevalence of broadband internet is also driving a significant surge in online activity.

"Property- related web searches have increased significantly over the past year. According to Arthur Goldstuck of World Wide Worx, about 10 percent of the country's estimated 8.5 million internet users now spend time every month browsing property. This increase in activity is gradually starting to translate into actual sales, with the number of transactions starting to edge slowly upwards."

Verryne says property sales have increased by about 4 percent compared with the same period last year, indicating a steady growth curve in light of 2010 to 2011's similar year-onyear improvement.

"Property prices have also started to rise, with an estimated 8 percent average increase in price compared with the same period last year. If sustainable, this trend is likely to once again open the market up to investors."

Property investors played an integral part in driving the market during its boom period from 2002 to 2006, but have been less active in the post-recession era. This has been primarily as a result of low profit yields from buy-to-let investments.

As a result, investors have turned their attention to entrylevel housing, which continues to show growth. A number of government initiatives focusing on alleviating banks' risk in lending to entry-level buyers are expected to continue to drive growth in this sector.

The banking sector also continues to demonstrate renewed confidence in property, with increased budget being allocated to marketing home loan and mortgage offerings. Initiatives such as pension-backed loans have also helped to ease the bottleneck created for buyers over the past few years.

With banks' home loan divisions starting to return to profitability, and mortgage criteria having been slightly relaxed, the potential for investors is great, says Verryne.

"Property prices remain relatively low, making it an attractive market for buyers with access to capital. The abundance of property information now available online also means that investors can easily shop around for bargains, which are likely to accrue significant value in the coming years.

"The biggest challenge for prospective property buyers comes in the form of personal finances. Banks simply cannot grant financing to buyers who can't prove their ability to repay loans. Therefore, consumers wanting to enter the property market should be working towards reducing debt and clearing their credit records.

"For those with access to capital, the property market is primed for investment, and with the next interest rate hike only expected to come towards the end of the year, prospects for buyers remain promising," says Verryne.

Sunday Times

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