News
Light at the end of the property market tunnel?
October 16th, 2008
2008 has been a depressed year in the property market, with many consumers reluctant to buy. The number and value of transfers at the deeds office speak for themselves.
Looking at registrations at the deeds offices there were 83 587 transfers (value: R37,6m) in the 1st quarter of 2006. These numbers grew steadily, and peaked in the 3rd quarter of 2006 with 99 959 transfers (value: R63,9m). With the exception of the 3rd quarter of 2007 there has been a steady decline in the number of transfers registering at the deeds office. The latest numbers from the deeds office show that in the 2nd quarter of 2008 only 75 337 transfers (R47,46m) took place.
However, there is light at the end of the tunnel. In Property Mortgage Market Update - September 2008, John Loos points out that ‘plummeting New Mortgage Loans are helping to stabilise the household debt situation’. He adds that outstanding household debt has been slowing steadily since 2006, leading to a decline in debt-to-disposable income ratio, which is crucial for a residential market recovery.
Figures released by First National Bank indicate that price deflation has already been in progress for six consecutive months since March 2008. Around 5% year-on-year deflation is expected in the first half of 2009, before price inflation resumes late next year on the back of recovering economic growth and declining interest rates. This confirms that the property market follows cycles. Some economists even suggest that we may have reached the bottom of the current cycle, with a recovery predicted in 2009.
Another positive sign is that the South African Reserve Bank (SARB) did not increase the repo rate in October, which could indicate the peak of the interest rate cycle. Some economists are predicting interest rate cuts as early as December 2008. They are also expecting nominal interest rates to fall steadily at every Monetary Policy Committee meeting, with prime falling from the current 15.5% to 13% in the second half of 2009.
Furthermore, the current market activity slump and deflated prices may work to investors’ advantage. Many will see the present as the best time to go out and scoop up some of the bargains that have not been around in the past few years. Michael Jackson, editor of the Property Professional magazine, recently said in his editorial: “Let’s get it straight: the property boom is over. The property market isn’t.” We couldn’t agree more.
As always, Quince Property Finance is on standby to provide bridging finance to the participants in these transactions, be it for transfer duty for purchasers, commission bridging for agents or advances to sellers.
2008 has been a depressed year in the property market, with many consumers reluctant to buy. The number and value of transfers at the deeds office speak for themselves.
Looking at registrations at the deeds offices there were 83 587 transfers (value: R37,6m) in the 1st quarter of 2006. These numbers grew steadily, and peaked in the 3rd quarter of 2006 with 99 959 transfers (value: R63,9m). With the exception of the 3rd quarter of 2007 there has been a steady decline in the number of transfers registering at the deeds office. The latest numbers from the deeds office show that in the 2nd quarter of 2008 only 75 337 transfers (R47,46m) took place.
However, there is light at the end of the tunnel. In Property Mortgage Market Update - September 2008, John Loos points out that ‘plummeting New Mortgage Loans are helping to stabilise the household debt situation’. He adds that outstanding household debt has been slowing steadily since 2006, leading to a decline in debt-to-disposable income ratio, which is crucial for a residential market recovery.
Figures released by First National Bank indicate that price deflation has already been in progress for six consecutive months since March 2008. Around 5% year-on-year deflation is expected in the first half of 2009, before price inflation resumes late next year on the back of recovering economic growth and declining interest rates. This confirms that the property market follows cycles. Some economists even suggest that we may have reached the bottom of the current cycle, with a recovery predicted in 2009.
Another positive sign is that the South African Reserve Bank (SARB) did not increase the repo rate in October, which could indicate the peak of the interest rate cycle. Some economists are predicting interest rate cuts as early as December 2008. They are also expecting nominal interest rates to fall steadily at every Monetary Policy Committee meeting, with prime falling from the current 15.5% to 13% in the second half of 2009.
Furthermore, the current market activity slump and deflated prices may work to investors’ advantage. Many will see the present as the best time to go out and scoop up some of the bargains that have not been around in the past few years. Michael Jackson, editor of the Property Professional magazine, recently said in his editorial: “Let’s get it straight: the property boom is over. The property market isn’t.” We couldn’t agree more.
As always, Quince Property Finance is on standby to provide bridging finance to the participants in these transactions, be it for transfer duty for purchasers, commission bridging for agents or advances to sellers.