New optimism in the UK home market augers well for SA, says Mike Greeff
| Those who believe, probably correctly, that the South African
residential property market mirrors what is happening in the UK will be
interested to learn that the UKs mass-circulation Sunday Times
Money supplement has run a report in which they quote three of the countrys
biggest lending institutions as saying that further price falls will not
be above 7% and that prices will be rising again before the end of this
Lloyds, now Britains biggest lender, Halifax and Nationwide were all agreed that Lloyds original prediction of a further 15% drop this year giving a cumulative drop of 34% since August 2007 now seems over-pessimistic and that the additional drops this year will limit the cumulative drop total to 25 to 30%.
Halifax was quoted as saying that the house price/average earnings ratio is now at its best level for years and that homes have not been so affordable for a long time. At the peak of the 2007 boom, the average house price was 5,84 times the average earnings but the figure is now down to 4,26. This is only 0,2% above the long term average for the last 50 years and, says a Halifax spokesman, there has, as a result, been a marked change in the mood.
Optimism was also fuelled by the reports that the big lenders have reduced the cost of loans for those with small deposits. For example, Lloyds will now fix the interest rate on a loan with a 15% deposit at 5,79%, while its fix for those with a 25% deposit is 4,89% - significant reductions on the previous levels.
Various lending body spokespeople said that these favourable rates are unlikely to remain in place for more than a month or two and for those eyeing the buy-to-let market now is a very good time to make a purchase to hesitate could be disastrous.
Mike Greeff, CEO of Greeff Properties, said,
We keep a close watch on the UK property market because SA selling price trends tend to be in line with theirs, with this difference, that we have traditionally been less spendthrift and less inclined to over-borrow. The Sunday Times optimism ties in with what we have been saying locally for some time and it is encouraging to find that they see the end of price falls as not far off.
Article by: www.greeff.co.za