Homeowners under pressure

2008-06-03 00:00

As median house prices continue their downward march, homeowners and investors have been warned that they should forget about real (after-inflation) returns on residential property until 2010.

The news comes as fears escalate over the sharp rise in the number of homeowners who can no longer afford to hold on to their properties.

Research from auctioneers and property valuators Alliance Group shows that by September this year more than 55 000 South Africans will battle to meet monthly bond repayments if they don’t refinance existing debt, with 8 000 likely to lose their homes in the process.

Jacques du Toit, Absa home loans senior property analyst, noted in his latest quarterly housing review released this week that interest rates will continue their upward march over the next few months, placing a further damper on an already depressed housing market.

His comments were followed by the release of data that showed that median house prices fell 13,2% year on year in May 2008.

Standard Bank’s monthly property gauge showed the South African median house price fell to R520 000 last month from R530 000 in April 2008 and R599 000 in May 2007.

Housing sales and house price growth are likely to soften further over the next 12 to 18 months as households’ financial positions come under more strain.

Even more depressing warning signals have come from Rael Levitt, chief executive of Alliance Group, who argues that auctioneers are able to provide a more up-to-date picture of house price movements as they deal with real-time transactions.

Levitt said that if rates rise again, it will accelerate price declines: “That’s an ominous prospect because price falls can be infectious. If one house in a street sells for a lower than expected price, that can have a knock-on effect …”

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