Interest rates add fuel to the fire

The almost certain prospect of further interest rate hikes will put more pressure on property sellers and ensure a real consolidation in the property market during 2008, with prices likely to show flat-line growth at best.

This is the view of Lew Geffen, chairperson of Sotheby's International Realty in South Africa, who says that with buyers already in a much stronger negotiating position, sellers are beginning to appreciate that market conditions are changing.

"Sellers are now officially out of denial. With a significant increase in stock on the market, they are coming to the realisation that there is little point in hanging on to their properties in the hope of achieving higher prices," he says.

Compression is likely

Geffen notes, however, that as trading conditions open up there has been something of a spurt in the market, with, as yet, no visible differentiation in property prices. He suggests, however, that some compression is likely in the wake of further interest rate hikes.

"As homeowners experience more financial stress, we will see more desperate sales and more Properties in Possession (PiPs). I would say it's going to be a good time for auctioneers."

Geffen says that a shake-out in the local industry is inevitable — ultimately to the benefit of the stronger companies employing top-quality agents.

"The number of players in the local market looks set to decrease by between 20 and 30 percent. True professionals, however, will not only weather the storm but should be in a stronger position to negotiate sole mandates and better commissions," he concludes.

Article from: www.iafrica.com