A large and well known Bond Origination company recently reported that house prices continue to fall with a further 0,7% in February of this year with an average house price now R827,000. Forecasts are that the current low level of activity and negative property price growth would continue until June/July of 2009.
House prices have been ticking down steadily for months with no real signs of changing course and mortgage volumes continue to fall despite the interest rates having been reduced by a cumulative 150 basis points (1,50%) since December 2008.
FNB`s house prices for February released recently suggest that the average property is worth 7% less than this time last year.
Standard Bank also recorded residential property having fallen by around 2% compared to the same time last year.
ABSA recently delivered its assessment of mortgage advances statistics noting that the growth in value of advances is at its lowest in about 6 years, largely attributed to the sharp slowdown in the residential property market, which in turn has been hammered by high inflation and interest rates and the tightening of lending criteria by the banks.
Banks continue to restrict lending where the average bank decline ratio has jumped to 61,2% which has severely constrained any property market recovery.
Banks have severely tightened lending since December 2008 and these policies, if not relaxed soon, are likely to have a further dampening effect on the property market where the banks are now demanding higher deposits (between 10% – 20%) as a percentage of the purchase price where the outlook for the first half of 2009 “remains worrisome.”
It is anticipated that house price growth will continue to be negative over the short term and medium term but likely to improve somewhat towards the end of 2009.
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