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08/05/2008 11:48 AM - (SA) Debt tightens screws 09/05/08
Rael Levitt, executive head of the Alliance Group, says that these acute factors have already forced the selling price of property to drop by 10%. The figure is higher in coastal areas, he says. Since the recent increase in interest rates, the group's call centres are inundated with calls by sellers feeling the pressure and seeing auctions as a quick fix for their financial problems. The situation could get markedly worse if there should be another rates increase this year. All price categories are affected, but properties above R15 million and below R500 000 to a lesser degree. This does not mean these segments are immune to a market correction, warns Levitt. "There is no doubt that the sellers are becoming more realistic about price, largely due to supply exceeding demand for the first time in six years." The housing market's predicament is problematic for both homeowners and their financial institutions, "specifically for home loans that were awarded last year and where signs of negative equity are starting to appear," Levitt says. Negative equity occurs when the property is worth less that what it originally cost. 'Selling at less than they paid'
Market conditions are putting pressure on homeowners who are not able to sell their homes to cover their outstanding bonds. FNB property analyst John Loos says he believes house price are not falling nationally, though this could happen later in the year. "According to FNB's research, some sellers are selling at less than they paid but this does not apply to the majority of properties on the market, Loos says. "One has to look at the cycle, at some point the rates need to come down again. It's only a matter of time." (Property24/Elma Kloppers)
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