Don't kill the property golden goose

The SA property market has this year seemingly achieved the "soft landing"
that many commentators suggested would be the ideal scenario after an unprecedented four-year boom - but some stimulatory measures may now be necessary to prevent an over-correction.

So says Gerhard Kotzé, CEO of the ERA South Africa property group, who believes it is now seriously worth looking at the merits of "de-linking"
home mortgage rates from the rest of the interest rates structure to keep property as affordable as possible and boost home sales. This idea was mooted recently by Reserve Bank Governor Tito Mboweni.

Kotzé concedes that the latest property market statistics show that growth in property prices has slowed to the lowest level in 18 months in the wake of several interest rate increases and lower demand.

But he says, it has to be realised that in future growth in values will take place from the high base level reached during the boom years.

"Thus it's very likely that affordability will continue to be a problem for many ordinary wage-earners - as it is now in many other countries too - with the SA situation being exacerbated by building material shortages, high building costs and the long approval delays that developers here have to contend with.

"In fact, this already evident in rising demand for rental units as would-be buyers find it more difficult to qualify for home loans."

On the other hand, he says, the property and construction sectors are too important in terms of job and wealth creation to contemplate an occurrence here of what happened in reaction to a previous property boom in China, for example, where the government stepped in to curb an over-exuberant market and property prices fell drastically.

"On the contrary, what we need is some concerted effort to increase the size of the market and generate more home sales by helping first-time buyers to afford a home (with interest rate concessions, for example) and at the same time creating more housing stock specially for first-time buyers."

Issued by ERA South Africa
8 December 2006
For more information please call
Gerhard Kotzé at 012 682 9610
Or visit www.era.com

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