Is the Property Market Bottoming Out?

The information in this article is courtesy of Business Report (House Market Nears Bottom – Bond Choice – 17 April 2009).

One of South Africa’s biggest mortgage originators suggests that the residential property market is bottoming out.

Richard Gray, CEO of Bond Choice said this can be seen in the increasing volume of applications they have submitted to banks as well as the improvement in approval rate. He added that the around 2000 estate agencies with whom they deal are of the opinion that the market was not getting worse.

Although Gray are feeling positive about the market he still sees large deposits required by banks as the biggest knock to the market, as prospective buyers didn’t have the cash to put down.

Another large bond originator in South Africa, ooba, said that recovery in the housing market was imminent, although they can’t say that it will happen in the second half of this year or next year.

Saul Greffen, MD of ooba, recons that if the appetite of banks to lend increases, the recovery will happen quicker. He added that their bond application volume and bank approval rate had continued to deteriorate from July until February, although it has been stable for the past 2 months.

Jacques du Toit, senior property analyst at Absa believes a turnaround in the market is still a long way off. He recons that the full effect of interest rate reductions can not yet be seen as the household sector are still under financial pressure.

"I don't see the market turning in the near future," Du Toit said. "It may level out but not turn up. It might start recovering later this year, but I only see price growth and increased levels of activity early in 2010."

John Loos, property strategist at FNB Home Loans believes that the improved activity in the market shown by the FNB property barometer recently, is a result of interest rate cuts and improvement in affordability.

Oversupply and financial pressure are still the biggest reasons why demand won’t translate into price deflation, according to Loos. He expects house prices to decrease in 2010.

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