Will 2006 be another bumper property year?

Chris Nthite
Posted: Thu, 22 Dec 2005 08:00 | © Moneyweb Holdings Limited, 1997-2005

It has been another good year for the residential property market. House prices, as measured by the Absa House Price Index, are still growing by more than 10% - way above inflation.

This is, however, a far cry from a high of 35% in October 2005, but homeowners are still realising value in their homes.

But can double-digit growth in house prices be sustained next year?

Mike Spencer, of Platinum Global, reckons that in 2006 house prices will return to normal: buyers will have time to pick and choose before buying and sellers and buyers will be more evenly balanced. Both will have to give and take a little in order to reach a sale.

“Sellers especially will have to take note of actual prices being paid in their areas and will need to look more carefully at the Deeds Office research,” says Spencer.

He adds that it is already noticeable that more and more “For Sale” boards are appearing again – and staying there – where sellers have unrealistic expectations of real selling prices.

According to Spencer, 2006 is likely to bring rental properties back onto the books in reasonable numbers as sellers are forced to look at ways of minimising their costs while they wait to sell.

Alex Fenwick, CEO of the Aida real estate group, says although the market is currently less active than in 2004, there is room at the bottom end for a mini-boom and investors should take note.

“There is a great demand in this sector and strong growth can be expected if new stock can be brought to market.”

Writing in the Aida in Action newsletter, he says there is a risk, of course, that lack of development land may delay this opportunity. There is currently a severe shortage of zoned and serviced land and local authorities are under pressure to increase delivery.

At the same time, however, the cooling down of the market this year has resulted in stabilising house prices, says Fenwick. “A slight drop in consumer confidence has halted the boom spending that characterised the previous two years, and many buyers are now resisting inflated-asking prices.”

He explains that this does not mean prices are falling, just that sellers are being compelled to lower their sights and adjust their expectations to reflect market conditions.

Article by: Moneyweb