Residential housing market close to bottoming out

The latest figures from Absa Homeloans indicate clearly that in 2008 house price growth slowed noticeably in all price categories and across most of South Africa – but the overall picture is nowhere near as bleak as many property watchers would have us think, says Mike Greeff, CEO of Greeff Properties.

“According to ABSA, in the affordable housing sector average prices rose 10% (to R283 000) in 2008. In the middle sector the average prices rose 3,8% (to R965 700) and in the luxury sector it rose by 9,1% (to R4,5 million).”

In real terms, said Greeff, all sectors showed declines, varying from 1,4% to 7% but these were significantly lower than those of just about every other asset class in SA.

2009, he said, seems set to repeat the 2008 pattern.

“Absa’s prediction is a 2,5% nominal house price drop in 2009, but it should be noted that the Western Cape, with a 5,2% overall price rise, was in 2008 the outstanding performer in SA. Cape Town itself should see a 2,4% nominal price increase.”

“It has to be remembered that from 2004 to 2006 prices rose roughly 30% per annum. Any purchase before this date is, therefore, still showing an exceptional capital gain and will probably see a doubling of his home’s value by late 2010.”

Greeff Properties analyses, said Greeff, indicate that, although economic conditions are likely to remain fairly depressed throughout 2009, with real growth rate of 1%, the anticipated interest rate reductions are likely to start stimulating buyer interest.

“With an anticipated drop of 3,5% by October 2009 now would, in my view, be a good time to get into residential property. The current period must be close to the imminent bottoming out of the market.”

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