Property to recover slowly

2009-02-10 00:00

THE residential property market will stage a gradual recovery from its current slump and investors, agents, homeowners and buyers are unlikely to experience a repeat of the 2002-2005 "bull-run", despite the recent interest rate cuts.

This is the view of FNB's property strategist, John Loos, who told The Witness that the financial stress experienced by consumers is a major obstacle to a stronger recovery in 2009.

This view has been backed up by latest statistics from Absa released yesterday, which reveal that the number of houses sold in execution in 2008 increased 52% year on year.

Absa retail banking's Louis von Zeuner said the sales in execution recovery percentage was down significantly, from an average 91% in 2007 to 77% in 2008.

Loos has forecast house price deflation of minus 4,9% (year on year) for 2009.

Speaking at the release of the latest FNB residential property barometer in Durban recently, Loos said the barometer reflects a mild increase in activity during the fourth quarter of 2008, but he believes activity will only stage a stronger recovery in 2010.

The buy-to-let market is also expected to remain weaker.

"There is still a lot of - selling as well as sales in execution, creating something of an oversupply. As a result, national house price inflation is only expected to resume in 2010."

He is also concerned about the impact the current manufacturing slump will have on major manufacturing hubs, primarily Durban, Ekurhuleni and Mandela Bay.

"The big negative factor for residential property in 2009, though, will be the weak global economy and its negative impact on economic growth via SA's export-driven sectors."

However, Loos believes a number of positive factors are emerging.

"Residential and new mortgage loan demand is expected to recover gradually as 2009 progresses. The FNB residential property barometer shows early signs of property demand strengthening. The household sector's debt situation has begun to improve as interest rates start to decline - Emigration selling appears to be subsiding."

FNB's forecast on interest rates sees the prime rate declining to 12% by year-end.

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