Property set for ‘jittery’ 18 months

2008-12-30 00:00

THE worst of the economic and property crisis is over, but tough times are still in the offing, according to Homenet chief executive officer Martin Schultheiss. He predicts the property market will remain “jittery” for another year to 18 months at least.

Factors that will continue to make for difficult conditions include decreased disposable income, strict bank lending criteria, unstable global economic conditions, high debt ratios and socio-political insecurity, he said.

“Bank risk appetite has decreased considerably as home loans become less profitable and riskier, and house prices will continue to move downwards and in some instances fall further.

“That said, South Africa has escaped the worst of the global economic fallout thanks largely to tough bank lending criteria which, although difficult for consumers to come to grips with initially, will put them in a stronger position in the long run.”

Schultheiss said the likelihood of further interest rate cuts and a significant drop in the petrol price are also galvanising the public.

“The question is, do the banks have the appetite? Access to funding is a crucial ingredient at this juncture.

“Generally speaking, consumers are no longer awarded 100% bonds and ‘prime minus’ pricing is a thing of the past.

“Consumers now really have to do their homework to get the best possible interest rate and put down sizable deposits to get their foot through the door.”

The nature of the property industry is cyclical, he stressed.

“But although the market will turn upwards again, it’s doubtful that we will witness a repeat of the disproportionate asking prices of 2004 and 2005.”

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