Big ticket sales signal returning confidence

News > news - 03 Feb 2009

Big-ticket home sales, which have been missing from the market for months, have started to re-appear in the wake of improving sentiment.

So says Lew Geffen, chairman of Sotheby's International Realty in SA, who notes that his company has in recent weeks sold several luxury homes including a property for over R40m in Sandhurst and some on the Atlantic Seaboard.

"Last year there was only bad news - Eskom, Zimbabwe, higher interest rates and bigger deposits - and everyone froze in their tracks and put home purchasing on hold. This year there is much good news among the bad, people have adjusted to their new circumstances and things are starting to move again," he says.

"This is why we are once more seeing sales at the top end of the market in areas such as Hyde Park, Sandhurst and along the Atlantic Seaboard. Many of these multimillion-rand sales are cash deals and so do not really depend on declining interest rates but on improving sentiment. Prices have also declined substantially and this always induces the shrewd market to come out of woodwork."

In addition, Geffen says, emigration has dropped drastically "and more importantly, we are seeing really significant numbers of expats return to SA as they flee the fallout of the financial crisis in the UK, Europe and Australia. This is another positive for SA in terms of meeting our skills shortage and creating jobs that will ultimately boost housing demand."

Meanwhile, interest rates are set to decline this week and again in the coming months, inflation is falling and disposable incomes improving, which is already increasing the demand for housing, as evidenced by rising numbers of visitors at showhouses, Geffen says.

"This does not mean, of course, that prices across the board will immediately start rising again. The banks remain extremely credit-shy and it is still very difficult for most buyers to access home finance, so we believe prices will remain suppressed and even in decline until the middle of this year.

"But it does appear that we are now on the threshold of the bottom of the market and that a turn is in sight. Big-ticket sales are a strong indicator of returning confidence and this combined with an improving credit outlook should see prices stabilise in the second half of the year."



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