Aida reports property market 'in good shape' for 2006

News > news - 07 Dec 2005
Alex Fenwick
The South African residential property market can look forward to good health next year.

"Although the market is currently less active than in 2004, there is definitely room at the bottom end for a mini-boom and investors should take note," says Alex Fenwick, CEO of the Aida real estate group.

"There is a great demand in this sector and strong growth can be expected if new stock can be brought to market."

Writing in the Aida in Action newsletter, he says there is a risk, of course, that lack of development land may delay this opportunity - there is currently a severe shortage of zoned and serviced land and local authorities are under pressure to increase delivery.
At the same time, however, the cooling down of the market this year has resulted in stabilising house prices, he says. "A slight drop in consumer confidence has halted the boom spending that characterised the previous two years, and many buyers are now resisting inflated asking prices.

"This does not mean prices are falling, just that sellers are being compelled to lower their sights and adjust their expectations to reflect market conditions.

"And while indications are that interest rates will start creeping upward next year, the stricter application of credit criteria by lending institutions is likely to limit speculation in the market - and also create more opportunities for buyers looking to buy primary residences."

In addition, Fenwick says, rising interest rates would slow down the equity extraction that is reflected in the continued growth of mortgage advances and is adding to the upward pressure on inflation.

"There may, though, be good opportunities for genuine investors with a longer-term view as buyers who over-committed themselves during the boom start seeking to sell their properties to relieve financial pressures.

"And we also foresee an upswing in home alterations, renovations and additions as the persistently high costs associated with moving prompt existing home owners to take a fresh look at their current properties and upgrade or enlarge them, rather than go to the expense of finding a ready-made alternative."
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