The United Kingdom’s National Institute of Economic and Social Research has predicted that UK house prices will continue to decline until 2015. Back home, FNB’s May house price index indicates that the real house price growth rate, adjusted for CPI inflation in April remained negative at -2.4%.
This begs the question: is 2015 a reasonable prediction for a turnaround in the local housing market too?
Dieter Deppisch, Head of Property Research at SAPTG (South African Property Transfer Guide), explains: “Local economists such as Professor Erwin Rode have also pointed to a 2014/ 2015 meaningful upward shift in SA house prices. However this is not specifically because of trends in the UK property market. Primarily our market is dictated by local conditions while taking cues from Australia, New Zealand and the world’s largest economy, the USA.”
According to Deppisch, a number of uniquely South African factors are having an impact on the continued decline of the local housing market, including the tight lending criteria, high debt-to-income ratio in consumer households, an unstable job market and high stock levels in many areas accompanied by weak demand. As a result, the construction industry is also under heavy strain.
The start of the interest rate hiking season, expected by early 2012 will provide added pressure to an already embattled property market.
“We are at the bottom of the cutting cycle, at a 38-year-low, explains Deppisch. “The last time homeowners’ paying off a bond enjoyed an interest rate of only 9% was in February, 1974.”
What does this predication of a 2015 housing market recovery mean for buyers, sellers and property professionals?
“It means that we’ll see a trend of renovation rather than relocation, with homeowners choosing to hang onto their properties and take on home improvement projects instead of buying a new home.”
SAPTG’s website is SA’s most comprehensive source of property data with a suite of tools to help property professionals as well as the public monitor changes and trends in the local housing market.
“Estate agents in particular will benefit from keeping a sharp eye on market indicators at a micro level to assist buyers and sellers in making informed decisions,” says Deppisch.