Market now perfectly balanced, says Geffen
Despite the fact that the economy is now in recession - or perhaps because it is – the residential property market is currently in a rare state of perfect equilibrium.

So says Lew Geffen, chairman of Sotheby’s International Realty in SA, who notes that financially capable homebuyers who were simply “not interested” last year are now coming out of hiding as they perceive the market to be at or near the bottom of its cycle and set for an upturn.

“And on the other side of the scale we have sellers who are rational, reasonable and well-priced, so that demand and supply are in balance and deals are happening much more easily.

“We are seeing this especially in the R3m to R5m price category, where sales were virtually non-existent for months. In fact, we have seen a 100% increase in concluded transactions over the past three months compared with the December to February period.”

What is more, he notes, this week’s interest rate decrease of 100 basis points is likely to bring about a further improvement, because it will enhance affordability for those who are now keen to buy – and their ability to qualify for home loans.

“The income required to qualify for a R1m home loan had already dropped by more than R8000 a month since December and the latest increase will drop it by a further R2300. It will also bring the monthly repayment on such a loan to around R10 300 – or R3200 less than it was six months ago – and at the same time lower the cost of car and credit card repayments.

“This means that lenders looking at affordability in terms of the National Credit Act are going to find potential borrowers in a much better position than they were last year, and thus much more likely to be able to make the repayments on a new home loan. As a result, we could see the credit crunch start to ease up slightly.”

However, Geffen cautions, property prices need to stay down for any sort of market recovery to take hold. “With buyers still very cautious and cagey, sellers should definitely not read this interest rate decrease – or the next one – as a signal to raise their asking prices. They should rather take the opportunity to conclude a deal more easily and move on to their next home at an advantageous price.”

Article by: www.sothebysrealty.co.za