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Property News 2

Is SA at the bottom of the residential property price cycle?

It is common knowledge that property moves in cycles, and historically house prices generally move upwards when viewed over the long term.

For the property purchaser and seller, the trick is to identify the highs and lows in the cycle and to take action at the appropriate times in order to maximize profits. The guiding principle especially for buy-to-let investors is to buy low and sell high. For the buy-to-live sector it is also a good principle but less important because this type of investor generally has a longer time horizon.

While it is impossible to predict the market property investors can be guided by the following statistics which have been quoted by authoritative sources recently.

Some facts to consider:

 On Friday, 20 July 2012, the Monetary Policy Committee of the SA Reserve Bank announced an interest rate drop of 0,5% bringing the prime lending rate to 8.5% per year.  This is the lowest interest rate in SA since 1971 (over 40 years).

According to Saul Geffen, the chief executive of mortgage originator,ooba, April was the sixth consecutive month of positive year-on-year property price growth.  The average house price rose to R870.070 from R823.483 a year earlier.

Statistics from home loan originator, Betterbond, indicate that the market is on the up and picking up momentum.  Bond grants for the past three months have increased by approximately 20% year on year.

First National Bank’s Home Price Index showed a further acceleration in June 2012 compared with the same period last year.  House prices grew by 8,9% in June compared with the same period a year earlier.

According to Statistics South Africa the number of liquidations for the first 5 months of 2012 have decreased by 12,6%, and insolvencies for the first 4 months by 14,5%, compared with the same period a year earlier.

All these figures indicate that now is a good time to buy residential property but buyers must have a long term horizon as the halycon days of 30% growth per year experienced in the early 2000s are in the past. Nonetheless there is still plenty of money to be made in property and nothing beats the feeling of owning your own home!

Source: Article based on information from a Summit news letter

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