Buyers should prepare for 'sweet spot'

Buyers should prepare for 'sweet spot'

The property market's rapid price escalation has cooled in the last year on the back of higher interest rates and the short term effects of the National Credit Act (NCA), but these factors are conspiring to provide a 'sweet spot' for buyers says SA's leading bond originator.

"The pace of property price increases has slowed to the low double digits in the past few months thanks mostly to further rises in borrowing costs," says Saul Geffen, Chief Executive of MortgageSA that places one in five South Africans in their homes.

"Add to this the temporary slow down in sales volumes given affordability issues and the added disclosure requirements under the NCA, and you are getting into a real buyers' market.

"People should not be deterred by cyclical rises in interest rates and realise that the next 12 months or so will be a real sweet spot for buying property.

"This is because the rate cycle is expected to turn next year, making property more affordable and fueling price appreciation. And any short term impact the NCA might have will be worked out of the system.

"Beyond 2008 is likely to be another very strong period for the South African property market. The time to get in is sooner rather than later. Buyers are likely to be again chasing a rapidly rising market again as they did in 2003 and 2004."

At recent legislation workshop in Durban, FNB's property strategist John Loos, said that house prices, having already posted a more than 20 percent cumulative growth since the beginning of 2006, will record a doubling in their values in the second half of this decade.

"Buyers should remember that there is far less interest rate volatility now that there was in the 80's and early 90's thanks to the Reserve Bank's more stable policy and sound monetary management. This has bolstered homebuyers' confidence in the market and they feel emboldened to borrow more."

Adding to this is solid long-term economic growth and the continued emergence of a black middle class that is driving strong demand growth for housing.

Geffen also points to rising pressure on the building costs through shortages of both building materials and skills, resulting in a feed through effect on the cost of new houses.

"There is also the fact that urban land with infrastructure is scarce and become scarcer and its costs are expected to continue rising.

"Buyers should therefore view the future prospects of South African property with confidence."

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The property market's rapid price escalation has cooled in the last year on the back of higher interest rates and the short term effects of the National Credit Act (NCA), but these factors are conspiring to provide a 'sweet spot' for buyers says SA's leading bond originator.

Property is a worthwhile investment but for younger people hoping to buy it is difficult to take the first step, but not impossible says Rhys Dyer, Chief Executive of ooba, South Africa's leading bond originator that places one in five South Africans in their homes.

"Rather invest in simple, streamlined furniture," she says. "Try to have pieces that have legs and are not boxy. Not only will you have created space but also the functionality of the room improves as well."