South African property market deteriorates further - survey

JOHANNESBURG (Reuters) - South Africa's property market has deteriorated further than expected on the back of higher interest rates, a survey by First National Bank (FNB) showed on Monday.

Official interest rates have gone up by 5 percentage points since June 2006, putting pressure on household finances and adding to the stress of higher inflation, which hit a 5-1/2 year high in May, and soaring fuel prices.

The FNB Residential Property Barometer showed the index for the second quarter of this year slumping to 4.42, its lowest level since its inception in the fourth quarter of 2003. It was at 4.96 in the first quarter.

"Rising economic pressures are resulting in fewer buyers viewing show houses, continuing to drive down market confidence," FNB said in a statement.

The barometer measures market activity and sentiment by surveying 150 real estate professionals from top estate agencies.

"Real estate professionals believe the market remains uncertain due to a number of factors, including rising interest rates, rising inflation, a slowing economy and deteriorating sentiment," FNB said.

The survey found that more than a fifth of sellers were downsizing due to financial pressure and 8 percent were moving closer to work to ease the pressure of higher fuel prices.

Fuel prices in South Africa have increased by between 50 and 80 percent in the past year.

Properties were staying on the market for nearly four months, compared to three months in the previous quarter, and 85 percent were sold for less than the asking price, the survey said.

FNB said interest rates, inflationary fears and tighter rules for accessing credit, which were implemented last year, would continue to pressure the market, though it said the market might turn the corner in the second half of 2009.

Improvement in residential demand is anticipated in the second half of 2009, with interest rates and economic growth expected to take a turn for the better at that stage, the statement said.

"2010 is also expected to bring a major boost for sentiment, not only because of the FIFA World Cup, but because ... the completion of infrastructure projects should ... (give) the man on the street a feeling that progress ... is taking place."

Aticle from: http://africa.reuters.com