Time to put property on ‘recovery watch’

It’s an appropriate moment in time to put the property market on ‘recovery watch’.

That’s the word from Gerhard Kotzé, CEO of the ERA South Africa property group, who says that there are early signs that potential buyers who have had their property plans on hold for the last two years or so now need to start monitoring the market more closely with a view to putting those plans into effect.

“Nobody is suggesting hasty, irresponsible decisions in this respect. Also there’s a need to be clear about your investment intent. If for instance you are already a property owner with your sights on another home, trying to time the market is pointless in that if you sell your home for less you will also buy for less, all things being equal.

“The issue does become a little more complicated if you are planning to upscale, downscale or buy into another area or town where prices differ, in which case ‘investment’ as such may be of secondary importance to issues of lifestyle, security, family needs or career prospects.

“And still more complex are decisions that need to be taken for purely investment purposes. Good advice from professionals is clearly critical in all respects.”

Nevertheless, he says, market factors to keep an eye on going forward are:

  • Interest rates – predicted to decline by two or three percentage points this year;
  • The inflation rate – expected to drop to within Government’s 3 to 6% limit pretty rapidly over the coming months due to the business slowdown and the new basis for measuring inflation;
  • Prices starting to harden – SA home prices have dropped by 5 to10% which is considerably less than the 30 to 40% being experienced in the UK and US for instance, so we could come off a low base quite quickly;
  • More home loans being advanced – once banks become a little less strict in their lending criteria;
  • And increase in residential building plans passed - always a good indicator of property market health

“Keeping tabs on these various elements will obviously take some homework but the potential rewards justify the input,” says Kotzé. “Investors should also bear in mind that property remains essentially a medium to long term investment and that even under normal conditions of steady growth, one must allow the market time to work its financial magic for you.”

Article by: www.era.co.za