Property sellers will be obliged to be realistic about their asking prices in 2008 as a “rampant buyer’s” market will hold sway for much of this year, with at least one and possibly two more interest rate increases in the pipeline.
This is the view of Martin Schultheiss, CEO of the Homenet property group, who also added that the interest rates factors should ease somewhat in about a year from now — giving the market a moderate kick start again, but without the runaway price inflation witnessed at the market’s peak three years ago,
Meanwhile, he predicts that the real estate industry will experience consolidation as independent agencies battle to adjust to the new market conditions and choose to earn an income in other ways.
“Bigger, more established brands like Homenet have been in the market at times when interest rates rose over 20% and will rely on their strong brand and people to maintain market share.”
Schultheiss said the 2008 real estate market will be characterised by slower growth at the top end.
“The middle to lower end of the market is still experiencing a high level of demand as the migration of the mass market continues and therefore you can expect above average growth in these sectors of property.
“I think we will also see the emergence of property investors at the lower end of the market with strong rental yields making this an attractive place to invest.”
He added that there is understandably consumer wariness right now as debt-serving levels have reached record highs of around 76% of disposable income and homeowners’ ability to meet their bond commitments have become strained.
“We have seen an increase in the defaults that banks are experiencing, and it has also become a lot more difficult to qualify for a loan due to stringent affordability checks … But new products like the 30-year bond, interest-only repayments and payment holidays are available … to allow them to manage their debt during these tough times.”