Sellers become more realistic
The latest rise in interest rates (the seventh in 15 months) is having an impact on the market — but could however lead to more realistic pricing, says Lanice Steward, MD of Anne Porter Knight Frank.

According to Steward, she does not see the interest-rate hike as a "proverbial train smash", as there has been no apparent drop in the number of enquiries receiving.

In general limited slowdowns in the economy — and in house prices — should be accepted as “salutary”.

Too confident

“At some stage it always helps to put a brake on inflationary trends because a too-buoyant economy leads to reckless speculation. This is what happened in the USA. People became so confident of continued house value increases that they over-borrowed in the expectation of making a quick profit and refunding their bonds. When the market turned many of them found themselves in serious trouble.”

However, that's unlikely to be repeated in South Africa because the financial institutions have been more circumspect and the National Credit Act has forced lenders to be tougher.

Buyers and sellers, says Steward, should realise that so long as they are trading in the same market — i.e. not moving to another area — selling at a realistic price will not affect their capital empowerment because the same factors affecting them affect all others in the market.

Drop unrealistic expectations

“It is worth remembering that almost every buyer is also a seller, affected by the same rise and fall factors.”

Sellers, said Steward, must now learn to price in line with the market and drop unrealistic expectations.

“By all means go for a higher price for a week or two — but when it is clear that the market will not accept this, accept the valuation of a professional agent.”

More growth expected

If realism is brought into the pricing over the next half year there is no reason that the current level of sales should not continue, she says.

“There is every prospect, as I see it, of the market remaining very much alive and property value growth continuing at the ±10 percent predicted by Absa for 2008.”

Value growth is still to be expected. The prospects for residential property remain good because it is linked closely to the economy, which is still achieving a satisfactory growth rate despite the excessive CPI and low productivity.

“We need too to remind people that if they put additional money into their bonds they are in effect getting a 14 percent interest-rate tax free. Even with interest rates at their current levels it makes sense to continue repaying your monthly bond at the highest possible rate.”

Article by: