Property in demand, despite prices

The demand for property in SA belies reports of a "soft" market from First National Bank (FNB) and Absa (ASA), according to Jawitz Properties.

Absa reported that house prices encountered relatively sharper declines on a year-on-year basis in April, while FNB said the April increase in house prices may not be sustainable in the short term.

Jawitz Properties CEO
Herschel Jawitz said: "Demand is measured by show-day attendance, enquiries, buyer appointments and website activity, all of which are still showing better numbers than property price performance would suggest. It's not as if the phone is not ringing."

He added that the underlying activity in the market continued to be resilient, but converting this underlying activity and interest into offers and successful deals was the real challenge.

"When buyers do decide to put in offers, they usually reflect their perception of a buyer's market, and often much work still needs to be done to close the gap between buyer and seller," he said.

Jawitz listed bank lending as another challenge. Statistics such as debt-to-income ratios posed a problem in terms of the recovery of the market. The current measure was at 78%, down from about 84%, and economists were using this as a key measure for bank lending.

"Consumers are indebted, but with consumer spending in the doldrums and interest rates at historic lows, the likelihood of this measure coming down much further is slim."

He said it was likely that the debt-to-income ratio might rise when interest rates started to go up later this year, or in 2012. If banks tightened their lending further, a real recovery in property prices might occur only in 2013. - Moyagabo Maake, I-Net Bridge


Denny Crane

Denny Crane
It's not me ... yet. Denny Crane from the TV series Boston Legal. Click on picture if you're not sure who he is!