Rawson MD comment on rates staying the same
A good opportunity to boost the housing sector has been missed.
Tony Clarke, the managing director of what is possibly the fastest growing estate agency group in South Africa today, Rawson Properties, says he is disappointed that the SA Reserve Banks Monetary Policy Committee has decided to leave the interest rates unchanged.
This decision, he said, appears to be based on the premise that the economic recovery is now under way and that the economy does not need a new boost but this is certainly not true of the housing sector.
House values throughout South Africa, said Clarke, have been held down by the incredibly large numbers of homeowners forced to sell fast because they cannot meet their bond payments or other debt obligations.
Many of these distressed sellers, said Clarke, are working with their banks to achieve a fast sale and the banks in turn have mandated firms like Rawson Properties to handle the actual selling.
This is a necessary and, on the whole, efficient process but two facts are clear: the distressed sales will continue for a long while yet and, because they typically take place at 10 to 20% below the true market value, they depress house prices across the board. As a result, the steady recovery in prices which is now evident is taking place at a slower pace than would otherwise be the case.
Clarke says that his guestimate of the number of houses currently for sale under distressed conditions would put the figure at well over 20 000. Rawson Properties alone, he says, has R3,5 billion worth of distressed houses for sale and has established a separate division to manage this process.
A further drop in the interest rates, said Clarke, would have freed up the market and made it possible for more buyers to enter it. It would also, he said, have reduced that number of houses being sold under distressed conditions.
A 0,5% drop in the rates, he said, would also have stabilised house prices further and revived the housing market, especially at the lower end where first time buyers are still struggling to get 100% bonds and even when applying for 80 or 90% bonds are still experiencing high rejection rates.
Article from: www.rawsonproperties.com