"Why things will get better soon"

Property heavyweight Tony Clarke, a prominent economist has warned investors off residential for 10 years - but others think the cycle is set to turn soon.

While there is widespread acceptance in the residential housing market that the drop-off in sales volumes countrywide is in the region of 35% and that average house prices year on year have fallen by ±10% (albeit not in all areas) there is a wide range of opinions as to how long this "stabilisation" period will last.

Tito Mboweni's latest statement indicates that SA consumers are now reacting as intended to the hikes in the interest rates and are at last cutting back on spending - but a further 0,5% hike in the rates in August is likely. This could well be the last we will see.

If that reading of Mboweni's statement is correct it means that the long-awaited decline in the interest rates should start in the first quarter of 2010 (because there is usually a fairly long period with a stable interest rate after the increases have peaked) - and, once that happens, confidence in residential property will return, as it always does when consumers no longer fear rate rises.

Several factors lend credence to this expectation: there has recently been an improvement in the trade deficit and there are now definite signs that inflation, with the CPIX peaking at 11%, will stabilise by the end of this year. By then, too, a solution to the Zimbabwe situation could be on the way.

The Rawson analysts are, therefore, now looking for a levelling off by the end of this year and a slow but steady upturn towards the end of 2009, with the market strong again by 2010. Unless further unforeseen factors crop up, I see that as a realistic assessment of how the market will perform.

The Rawson Group has fared better than most in the current situation largely because of its market positioning.

As we have said before, now is an excellent time to buy because good property deals are available throughout SA.

* Tony Clarke is managing director of the Rawson Property Group.

Article From: www.sapropertyinvestor.co.za