Don't delay your property plans in a softer market

The property market is still on track for a recovery possibly as early as the third quarter in 2008, notwithstanding the latest interest rate increase.

That's the view of Gerhard Kotzé, CEO of the ERA South Africa property group, after canvassing analysts and commentators in the industry.

"The general consensus is that the market will move sideways for about 12 months but thereafter, it should start to recover and gradually build up a head of steam going into 2009," he says.

"Interest rates will have been lowered slightly by then, pent up demand will need to be satisfied and salaries and wages will have caught up with home prices to some extent, making property more affordable. Also the final run-up to the World Cup will be in full swing, resulting in injections of money into the economy that will translate into further demand for property."

"And given this scenario, the various stakeholders in the industry should apply certain strategies", he says. Sellers should not delay. The price you receive now will buy a similar standard of property, provided the sale date and purchase date are not too far apart. In other words, the buy/sell market pricing mechanism balances out.

"For buyers the message is identical; don't delay your plans if at all possible because prices are continuing to rise, albeit it more slowly."

Similarly, Kotzé says, buy-to-let investors may be tempted to wait for bargains to appear, but the difficulty is being in the right place at the right time. "Calling it" correctly is more luck than science.

"On the other hand, the rental market is recovering, due partly to the National Credit Act (NCA) which has made it more difficult to obtain bonds.

"Investors should however assemble larger deposits to reduce bond costs, be selective in their choice of property and be prepared to wait for prices to harden again before re-selling."

Basically, he says, all stakeholders in the market should actively use the breathing space afforded by the current property market slow-down to position themselves for the next upturn.
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