The housing market at present paints a false picture

The strangest thing about this market, says André Hamman director of Huizemark, is the fact that it is perceived to be a buyers’ market characterized by a surplus of sellers, few buyers and property prices under heavy downward pressure. We find ourselves in a situation, however, where we have limited stock, showhouses are busy with an average of around 15 visitors per showhouse and a fair amount of the buyers are in a financial position to put in offers.

This is as a result of various factors:

1) Buyers have by now had the opportunity to save deposits and are in a position to buy.

2) As a result of a decrease in interest rates many financially pressurized Sellers who should be selling have decided to withdraw their properties from the market.

3) This temporary surge in demand has created the impression that prices may have bottomed out.

It is our opinion that in fact the housing market at present paints a false picture in that the future will follow one of two scenarios based on the fact that according to comments from some very highly placed bank personnel and the media there is a massive pent-up debt burden which until now has been contained by the banks.

Scenario 1: The debt burden is able to be absorbed and dealt with by an improving economy, which will be under pressure for a period of approximately 1 – 2 years, but there will be no patently obvious signs of the debt under-current. Property prices will be under pressure, but will not drop drastically.

Scenario 2: The debt burden is not dealt with internally and is exposed via insolvencies and repossessions / auctions to a larger extent than what is presently the case. This massive oversupply of properties will dramatically influence prices and buyers confidence.

The banks’ decisions to accommodate non-paying clients for up to twelve months in arrears in effect are exacerbating the problem. What the banks are doing is creating a situation whereby homeowners, who can not afford their monthly mortgage payments, are allowed to stay in their homes and the outstanding debt to the bank simply continues to grow.

This situation has created a window of opportunity for sellers to get what may well be higher than real market value for their properties.

Article by: Andre Hamman - www.huizemark.com