Residential property markets in rural areas are struggling in the face of strict credit criteria.
Brent Haynes of the Aida Bethlehem franchise in the Free State says rural markets are being penalised by the National Credit Act since rural salaries are much lower than in the cities, which makes affordability a big problem.
"Banks now require a 10% deposit on residential properties and up to 50% on commercial properties, which is pushing many prospective buyers out of the market.
"Not many local buyers manage to come up with the required deposits. In Bethlehem, for instance, salaries average between R3000 and R7000 a month, leaving little room to save the required R80 000 deposit on an average family home."
Haynes adds that substantial interest rate cuts in quick succession would alleviate the situation. "Lower bond repayments will improve affordability and at least make it easier for existing homeowners to cover their monthly bond repayments," he says.
Financial pressure on homeowners has also seen more units offered for sale and asking prices have dropped by as much as 20% since the highs achieved at the end of 2007.
Haynes says that in some cases owners are putting their homes for up for sale and offering to rent them back from buyers. "In a recent case a homeowner who could not keep up his R7000 a month bond repayment marketed his home at R650 000 with the offer to rent it back for R4800 per month."
At the same time, demand for housing has put upward pressure on Bethlehem's rental market. "Many residents are already left with no option but to rent homes and additional demand from construction companies that are upgrading the national Bloemfontein/Durban road has seen rentals increase."
One-bedroom flats are now letting from R2000 per month, small townhouses achieve rentals of between R3200 and R4200, and rentals for family homes range between R4500 and R7500.
Issued by Aida National Franchises