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Latest house sales data disappoints

29 August 2008 Gareth Stokes

A quick look at the latest Absa House Price Index confirms that the market for residential houses is in a bit of a slump. The bank reports that the average nominal price of middle-segment housing increased 3.2% year-on-year to July, taking the price for a

It remains to be seen whether the expected improvement in house prices late next year will stop the decline in unit sales.

A downbeat report from estate agents and bond originators

According to a recent report on Fin24.com, popular estate agency RE/MAX and bond originator BetterBond have noted a significant fall in house sales in the residential property market over the first seven months of this year. Readers should note that these statistics refer to a drop in actual units sold, and have no bearing on the prices achieved. RE/MAX compared the number of houses sold between January and July 2008 with the same period in 2007 and released the results across four price categories…

Although unit sales in the lowest price bracket (up to R499 000) were expected to weather the affordability storm, this housing segment recorded a 36% drop. And for higher values things were even worse… Unit sales fell 42% in the R500 000 to R749 000 price bracket, 39% for houses priced between R750 000 and R999 999, and 33% for houses priced from R1 million to R1.5 million. RE/MAX reports the biggest drop in unit sales was for properties priced from R1.5m to R2 million, at 48%.

These statistics are not surprising given current concerns around affordability. The number of houses being registered to first time buyers has apparently fallen from 32% last year to only 16%. Young graduates are fast realising that the salaries they earn aren’t even enough to climb onto the first rung of the property ladder.

Too early to call a revival

The numbers paint a dreary picture; but they couldn’t stop RE/MAX SA marketing and finance director Jeanne van Jaarsveldt from adding a few positive comments. She believes local homeowners and buyers are “set for a reasonably good period in the property market for the next six months, which will in all likelihood prove to be first step towards definite signs of a market recovery.” She might be right; but it’s going to take quite some time before people flood back to the housing market. Affordability issues have taken care of that once and for all.

And she correctly identifies changes to the South African consumer credit environment as part of the reason: “The way lending institutions look at consumer risk and debt exposure has forever changed the face of the real estate market!” It’s not only the credit providers that have wised up; but consumers too.

Editor’s thoughts:
There’s no doubt house prices will show an improvement when interest rates start coming down. Some economists are already pencilling in four rate cuts next year. That might prove ambitious; but the real issue is whether rate cuts alone will revive flagging volumes. Do you think buyers will return to the market when rates fall – or will they be thwarted by the new credit regulations? Add your comments below, or send them to gareth@fanews.co.za

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