Lower rate 'should mean less distressed properties'

Jan Davel, MD of the RealNet estate agency group, says this week's interest rate reduction will obviously ease the financial pressure that many people are feeling as a result of increased municipal tariffs and higher food and fuel prices.

"And the most important immediate effect of this on the property market will be to reduce the number of homeowners who find themselves in such financial distress that they either default on their home loans or are forced to sell - and thereby to reduce the number of distressed properties coming on to the market and depressing property prices.

"In addition, of course, the lower nominal home loan interest rate will make it easier for prospective buyers to qualify for home loans, so we can expect to see increased buying activity and faster absorbtion of the oversupply of stock in the market. In due course, this will result in prices beginning to show a distinct upward trend across the board.

"Consequently, would-be homeowners should read the rate reduction, which takes the bond rate to the lowest level in almost 40 years, as a signal to buy now, especially as rentals in many areas are now at the same level as bond repayments for similar properties.

"Sellers, however, would be well-advised not to raise their asking prices at this time, but rather to cultivate the possibility of greater interest in their properties and faster sales that will enable them to take advantage themselves of a lower interest rate when securing their next home loan."

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