Slowing house price decline hints at upturn

Tuesday, 13 October 2009
Slowing house price decline hints at upturn


The shake out of the property market is nearly over but the industry decks have been cleared, leaving only the hard core of estate agent ‘survivors’ and the way has been opened for the rebirth of the industry.

However, says Gerhard Kotzé, CEO of property group ERA South Africa, it will definitely not be business as usual going forward and the market will see more creative and innovative ways of delivering service and professionalism, which is good news for home buyers and sellers alike.

‘I expect to see lots of new business models, new products and healthy competition for business between the top players that are left. Also, because there’s little flexibility on the financing side we will be back to the intrinsic value of a given deal i.e. value for money in both the property itself and the service.

“Levels of professionalism overall will improve while changed market fundamentals will ensure there is no runaway price inflation in a very different environment to that which existed up until mid 2007.

“I therefore see a ‘back-to-basics’ scenario with home prices slowly coming out of deflation in 2010. Further ensuring a much more sober property market is continued pressure on disposable incomes and over-indebtedness amongst consumers.

“The situation has been relieved to some extent by lower interest rates which has reduced the cost of debt servicing although there remains a minor chance of further rate cuts but all indications are we are at the bottom of the rates cycle and that we can expect a sideways movement, followed by a moderate rates bounce in late 2010.

“For the moment new mortgage advances remain low but this will change as the economy picks up a modicum of momentum. The August ABSA home price indices further substantiate this picture of modest recovery, showing slowing year-on-year price deflation with predictions that there will be a 3% drop in nominal terms in house prices for 2009 as a whole.

“Meanwhile Spring has brought with it a more upbeat mood in the property market and our agents report a definite increase in sales day turnouts and completed deals, with security villages still being in the greatest demand but accompanied by an improved demand overall.

“The bottom line is that we’re entering a new cycle of the market with less speculative activity and more solid growth, serviced by fewer agents whose professionalism will be in demand.”

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