The Big Five Challenges Facing the Market

The information in this article is courtesy of Real Estate Web (Samuel Seeff's Crystal Ball - 10 November 2008)

A resilient property market, as well as the local economy has proven that we can expect a come back – even as soon as next year this time. According to Samual Seeff, chairman of Seeff Properties there are in fact 5 big challenges that the South African market will have to face in order to make a recovery:

Bank has substantially tighten there lending criteria, higher deposits has been demanded, not to mention the effect that the stringent demands of the New Credit Act have had on the property market.

As a result of this, one out of every two bonds applications has been rejected, which has economist predicting a further slowdown in mortgage rates.

Property prices have dropped significantly due to a weakening demand and high interest rates. Seeff urges those who can secure bonds to buy property now. The predictions by economist here are that the prices will pick up within a year, and further escalate by 2010.

High interest rates is a big challenge, although economist suggest that relieve is on its way. However, the current turmoil in the international market has had a negative effect on the Rand and an unexpected drop in the producer price index, maintains to be a hefty concern.

Therefore, The Reserve Bank won’t cut interest rate just yet, but it can be expected after the recalculation of inflation figures to be introduced next year.

Poor investor confidence, caused by the current turbulence in the international market, has certainly had an effect on the property market. The good news is that exchange rates have taken some strain off the market.

Negative sentiment along with banks tightening up their lending is causing poor consumer confidence. Among other things that are also keeping buyers off the market are bond repayments increasing by 40% over the past 2 years, and food prices continuing to rise.

But relief is in sight with drops in the oil price and slowing inflation, which also indicates that the market is likely to recover in the last quarter of next year.

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