Property prices to rise 'between 10 and 15% in 2006'

Property prices to rise 'between 10 and 15% in 2006'

Property prices are likely to rise between 10 and 15% in 2006 according to South Africa's leading bond originator.

Saul Geffen, Managing Director of MortgageSA says, "We remain optimistic about prices for 2006 although we do anticipate a cooler market. We therefore expect prices to appreciate by between 10 and 15% in 2006."

"The level of property price increases that have been experienced over the past few years were unsustainable. The fact that growth rates are coming closer to normality makes a bubble situation less likely. A more normal and sustainable market is developing as growth rates slow"

Geffen says that MortgageSA's forecast is based by analyzing the sales of the country's top estate agencies and the trends of the bonds they place with banks on properties, across various price ranges nationwide.

"Property remains a good investment. Even the forecasted lower returns are better than many other asset classes locally and internationally and people should bear this in mind and not be too negative about property just because the rate of increase has slowed down. The key drivers of property fundamentals still look positive."

Geffen says that price increases in middle to lower income priced properties are likely to be higher than those in the upper priced areas and that he expects similar or slightly lower unit transaction volumes in the year ahead.

"Overall the outlook for the property market remains bullish. SA economic growth is increasing steadily, in many instances at higher rates than elsewhere in the world and this is leading to real wage growth, reduced unemployment and increased direct foreign investment. The economy is robust and this means a stable macroeconomic outlook for some time to come."

Geffen also points to the emerging black middle class and that increased government spend is allowing more and more people into the formal economy, resulting in increased purchasing power.

"And as we head towards 2010 and closer to World Cup Soccer, we expect to see positive spin-offs for the residential property market."

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