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Nov 26, 2012:
JOHANNESBURG - Well-Known estate agents are mixed about what the property market holds in 2013 but most believe that household debt and rising living costs will put a damper on the ability of prospective buyers to qualify for bonds and become homeowners in 2013.
They also believe that bank’s strict lending criteria will depress the market.
According to Jan Davel, MD of the RealNet estate agency group, “household finances are likely to remain under severe pressure in 2013, which will limit the ability of prospective buyers to qualify for bonds andbecome homeowners”.
Real disposable incomes are likely to shrink due to such factors as Eskom tariff hikes, rising food and fuel prices, higher municipal rates and the introduction of e-tolling, he added.
“So debt ratios that have been declining will, in many cases, go back up again and choke off demand. Many households will simply not be able to qualify for a home loan, despite the fact that interest rates are expected to stay low in 2013.
“And those same low interest rates will make it difficult even for those without much debt to grow their savings and pay the substantial deposits that banks so often require now in order to grant a loan,” notes Davel.
“Consequently, we expect relatively low nominal house price growth during 2013, and negative real house price growth, similar to that in 2012.”
Berry Everitt, MD of the Chas Everitt International property group, believes banks will continue, for most of next year, to keep a lid on the market by valuing properties and lending according to “bank security value”, which does not necessarily coincide with actual “market value”.
In other words, he says banks “will often not be prepared to lend as much as the prospective buyer is willing to pay, leaving the serious seller little choice but to lower his price if he wants to conclude a sale.
“So either way, this practice is likely to prevent the rising housing demand that we see occurring next year from being translated, as it usually would be, into rising property prices. In fact, we do not expect to see nominal house price growth top inflation next year”.
Neville McIntyre, chairman of Aida’s parent company Jigsaw Holdings, says the expectation all over the world, and not just in SA, is that a scarcity of capital will prevail in 2013 and that there will thus be no increase in mortgage lending.
“The demand for housing, on the other hand, is set to increase dramatically, and because of that we foresee that there will be a slight increase in the number of property transactions and in the number of new developments coming to the market.
“There will also, of course, be strong demand for rental properties, which will be good for buy-to-let investors and prompt an increase in investment purchases,” says McIntyre.
He says large numbers of “distressed” properties still being brought to market by the banks and sold at below market value will suppresshome prices in 2013 – “but at the same time these ‘bargain’ properties will sustain activity and awareness and make homeownership more accessible for quite a number of people”.
Lew Geffen, chairman of Sotheby’s International Realty in SA, differs from these views.
Geffen expects a “much more buoyant” residential property market in 2013 with 2014 being the “start of a new boom”.
“The recession is over, not only economically but also psychologically, and consumers are now much more confident about moving on with their lives and advancing their homeownership plans,” reckons Geffen.
“Housing demand is thus increasing at all levels, and although bank caution is slowing sales in the under-R1.5m category, this ismuch less of a problem in the higher price sectors, where buyers generally require finance for a smaller percentage of the purchase price,” he adds.
Lately, he says, Sotheby’s International Realty has experienced a sales surge in the R6m to R10m range, driven mainly by SA buyers taking the opportunity to upgrade to larger and more luxurious properties at the current favourable price levels – in the firm belief that these will not hold for more than another year.
With regard to overall price expectations for 2013, Geffen expects growth to be constrained at around the level of inflation until more stock is absorbed, but confident that they will start to climb strongly in 2014, “which will be the start of a new boom”.