Re­cov­ery not yet in sight

Finweek English Edition - - Property Compass -

HOW LOW WILL house prices go be­fore buy­ing sen­ti­ment starts to im­prove? Though there’s no sim­ple an­swer to that mil­lion­dol­lar ques­tion most in­dus­try play­ers don’t ex­pect the hous­ing mar­ket to turn for the bet­ter be­fore late 2009 or early 2010. Prop­erty economists, such as FNB’s John Loos and Absa’s Jac­ques du Toit, say this time around lower in­ter­est rates alone won’t be enough to kick-start hous­ing ac­tiv­ity.

Loos ex­pects SA’s hous­ing slump to get worse be­fore it gets bet­ter. “The risks have shifted away from inflation and in­ter­est rates to­wards eco­nomic growth. Loos says it’s still un­cer­tain how the global fi­nan­cial cri­sis will play it­self out and whether there’s more bad news to come. That un­cer­tainty will prob­a­bly en­cour­age SA’s banks to re­main cau­tious about lend­ing, plac­ing con­tin­ued pres­sure on hous­ing de­mand and prices well into 2009.

Du Toit says in his lat­est monthly prop­erty over­view that prospects for the res­i­den­tial prop­erty mar­ket for the re­main­der of 2008 and into 2009 ap­pear “dis­mal”. He says SA’s hous­ing mar­ket has cooled to lev­els last seen in the early Nineties, with Absa’s house price in­dex now touch­ing a 15-year low.

Stan­dard Bank econ­o­mist Jo­han Botha says even if in­ter­est rates start de­clin­ing by sec­ond quar­ter 2009, the hous­ing mar­ket

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