Things are starting to look up for the South African Property Market as a number of real estate agents reported an increase in activity, suggesting that the slow market is bottoming out.
High interest rates and banks continuing to tighten their lending criteria are making others wonder if it’s time to celebrate yet. One of these agents is Mike Bester, CEO of Realty 1 International Property Group.
According to Bester it is not clear why some are so enthusiastic. High interest rates are still making it hard for some to access home finance and many buyers simply do not have the needed deposit to qualify for a mortgage. This, he cautioned, means that the market is unlikely to turn yet.
Bester advised investors to not expect a miracle upturn, even after a drop in inflation expected in the coming months. Hold on to your property or enter the market, Bester said, but until then we must wait for real evidence before we can be sure that the market is recovering.
The main obstacle that potential buyers need to overcome is getting finance. Following in Absa’s footsteps, Standard Bank is now demanding much larger deposits and introduced tough new lending criteria, while FNB is re-assessing its home loan criteria.
Banks are being stricter because of higher interest rates and lower capital growth on properties, according to Donnie Claassen of Quantro Garden Route. People who are hoping to buy real estate with the help of the bank must ensure they have a clean credit record. First time buyers are definitely the ones that are affected more because they tend not to have deposits.
Other lenders, according to Bill Rawson – chairman of Rawson Property Group, are sneaking in added costs like big penalties on mortgage bondholders who fail to give a full three months’ notice of their intention to terminate a bond.
The information in this article is courtesy of PropertyWire (Chink of light for South African property market not helped by lending crackdown” – 30 October 2008)
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