Affordability the key to next year's property market

Affordability is going to be vital in maintaining the early momentum of the property market recovery and in this context the longer that interest rates can be maintained at present levels, the better.

Gerhard Kotzé, CEO of the ERA South Africa property group, says there's no question that the market is picking up steam but that the recovery will not become full blown until a number of factors fit into place.

"And key in this respect is the cost of property in relation to disposable income - that is, the affordability factor, which is of course influenced by employment levels, household indebtedness and property prices per se, but mostly by interest rates.

"The rate of inflation comes into the picture here and while the good news is that it has declined to within the Reserve Bank's target range of 3% to 6%, we are concerned that this situation may not last long since there are Eskom price hikes in the picture, wage increases due next year and budget deficits in the Treasury which will have to be financed by borrowing.

"On the plus side for the property market, however, the banks are easing open their lending purses again and there's a more positive mood in the market as evidenced by good turnouts at show days and more importantly, by the number of sales concluded - something to which we as a group can attest."

In short, he says, great care is still needed not to upset the current favourable balance of positive against negative factors tipping the market towards full recovery, and the best help now would be for interest rates to at least be kept stable.

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