Property to turn: Loos

The dip in the South African residential property market, which started late in 2004, would begin to turn for the better towards the middle of next year, a property expert said.

"On the balance of things, it would appear that the residential property downturn still has a little way to go before things turn for the better," wrote John Loos, a property strategist at FNB, in the Residential Property Market Q3 Update.

He cited a shift in the direction from rising interest rates to flat movement and higher economic growth as catalysts for the residential property’s turnaround.

South Africa’s interest rate hike cycle is believed to be near its peak with most economists believing that the central bank would hike rates one more time this year before long period on sideways movement sets in.

A combination of no further hiking, and the start of a global economic recovery next year, leads to expectation of gradually accelerating year-on-year real domestic economic growth after bottoming out at 4.5% early, Loos said.

The residential property market has been showing deteriorating activity levels over the past few years. The latest FNB Property Barometer shows estate agents reporting diminishing activity levels in the market in the second quarter and further deterioration in the July survey.

The implantation of the National Credit Act - which sets tough lending criteria - is one of the key factors contributing to the downturn of the property market, according to the Barometer.

Other factors include rising interest rates and slower economic growth - from 5% last year to the projected 4.5% early in 2008.

"For the rest of 2007, it appears that things will get worse before they get better," Loos said.

Article by: By Tiisetso Motsoeneng, I-Net Bridge -