Outlook upbeat for property market

The outlook for the property market appears upbeat, provided that the interest rate holds, says Seeff chairman, Samuel Seeff.

A low interest rate used to be the core driver of market activity, but our experience over the past two years has been that it has done little to stimulate significant buyer activity. Yet, any indication of an increase now is likely to negatively impact the already low demand. Ideally, we would like to see the Reserve Bank’s Monetary Policy Committee to take a prudent stance when it meets this week and while we understand that there is growing pressure for an interest rate hike, such a move is likely to set us back, says Seeff.

We are encouraged by reports of sales growth from the large agencies and our own 27 percent growth for the year up to April, but attribute this to market share gains rather than any real uptick in market activity. The marginal easing of the lending criteria on the part of banks has also led to more transactions being approved, but we are nowhere near the transaction volumes that would be viewed as normal market activity.

The volume of urgent sale stock continues to impact both normal buyer demand and prices, he says. It is vital for the recovery of the market, that significant progress is made to clear these this year. Only once this has taken place can we return to normal market activity without outside influence to hold back prices.

Market indications are that it remains vital for sellers to price conservatively and in line with what buyers are prepared to pay. Where we have seen sellers heeding the advice of real estate professionals and pricing correctly, properties are selling, not only in the sub R1,5 million market, but also in the upper end of the market.

For now, market conditions continue to favour of buyers, but we anticipate that this balance will start to shift as we enter 2013. Buyers looking to secure good value should therefore take advantage while they can, but should do their homework and buy smart.

Investors looking to make a profit will have to wait out the year to see how the market unfolds, he says. If the bulk of the urgent stock is cleared, the economy remains steady and the interest rate holds at a low level, then we could look forward to some real strength returning to the market towards the end of the year.

As more buyers enter the market, competition will increase and consequently prices. We should then start seeing a return to normal market conditions by early 2014. This however, remains dependant on macro-economic factors including economic and job growth. The prolonged Euro-zone crisis, news that the UK is back in recession and impact of the middle-eastern political crisis on fuel prices also remain worrying factors on the horizon, he concludes.

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