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International recovery signs bode well for SA market
The UK and American property markets are showing the first signs of recovery, a scenario that bodes very well for the SA market.
Gerhard Kotzé, CEO of the ERA South Africa property group, says that while the local property market has been moving sideways for the past few months, the overseas indicators certainly suggest that the worst of the market slump may be over.
Thats good news for property markets and economies generally, although we are clearly not out of the woods yet.
Also, a key element in this picture is tax assistance for American homeowners to retain properties or buy for the first time. South Africa is seriously lacking in this respect.
Kotzé notes that sales of existing homes in the US have been showing consistent gains since April and that the chief economist of the National Association of Realtors in the US (the NAR) is on record as saying that buyers are being drawn into the market by improved affordability despite the recent uptick in US mortgage interest rates.
First-time buyers are particularly being drawn off the sidelines by the $8000 tax credit which is helping to absorb inventory, he adds.
And I think we could very sensibly introduce something of a similar nature for our own first-time homebuyers to give our market a boost.
Kotzé says it is also relevant to compare interest rates for mortgage bonds in the US where the rate for a 30-year conventional mortgage is still less than 5%.
Technically, South Africa is not far off that rate after allowing for the effects of inflation, but having said that more interest rate cuts locally would be very beneficial.
Meanwhile in the UK market, the rate of house price decline has slowed to its lowest since September 2007 and there is definite evidence of a recovery in activity, albeit from historic lows. Enquiries by new buyers have risen for eight months in a row and sales have also increased.
Article by: www.era.co.za