Top estate agents disagree with the Rode Report

Top estate agents disagree with the Rode Report

Say the market is favouring the buyer, especially the first time buyer.

Realtors Tony Clarke of Rawson Properties and Lew Geffen of Sothebys International Realty SA have questioned the latest Rode Report that says house prices are overvalued by at least 25% and will take at least five years to recover.

Geffen says the current market suits especially first time buyers: “…We believe that with nominal prices and rates at their current historic lows, there could hardly be a more propitious time for potential buyers to enter the market. Opportunities like this generally only occur once or perhaps twice in a lifetime.”

Clarke says: “My prediction is no growth in real terms over the next year, two years, and thereafter slow growth starting at between two and four percent per annum.”

He adds there is going to be a slow uptake in new development property entering the market, which from a first time buyer’s perspective will retain its value. From an investor’s point of view “if you’re going to buy the property, you’re still getting rental on top of that return, then you need to calculate that in the equation.”

Clarke was also critical of property economist Erwin Rode’s stance that prospective first time buyers would do better to rent for the next five years or so and invest the difference saved on a bond.

“Invest in what? What he [Rode] is not taking into consideration is the fact that a lot of properties are being sold at a distressed level which is rightsizing property values anyway because those properties are in competition with normal properties.

“From that perspective, yes, it’s going to be a while as these distressed properties are being emptied into the marketplace and it’s going to bring the real growth price down because they are in competition.”

However, Clarke says this should transpire over the next three years or so and not much longer as seen by Rode.

Geffen says Rode is “out of touch”. “For a start the banks continue to relax their lending criteria and are currently reducing their deposit requirements and granting more 100% loans as well as more loans overall.”

Geffen quotes figures from mortgage originator ooba that have shown a consistent month-on-month increase in home loan applications and approvals since the beginning of 2011.

Geffen says banks are willing more and more to provide 100% home loans. “Now we just don’t believe the banks would be doing this if they were concerned that home values were going to show a further serious decline – especially when one considers the losses they have faced just recently due to the over lending during the boom years…

“Demand is way up on 2009 levels in most large cities, and also in many smaller centres where a shortage of rental stock has pushed monthly rentals up to the point where it is now almost as costly to rent as to buy.”

Geffen points out that there has been little residential building activity in the past four years. “A really negligible amount of new stock has been added to the market during this time and with current supply steadily dwindling, we calculate that the momentum of price growth will pick up and that, short of a massive inflation shock, there will be a return to real growth within the next two years.”



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