Market sentiment on the buying of homes has seldom been more positive and is on much the same level as in 2007, says Bill Rawson, chairman of Rawson Properties.
He expects house prices to reach 2007 levels again within three or four months, but says the “enormous” difficulties experienced in obtaining bonds are still holding the market back.
“Banks seem to favour high return short term loans, for instance on motor cars, rather than house loans where they can seldom charge more than 10% interest. This is understandable in view of the fact that they have to maintain profits despite reduced lending. However, it is hitting the metropolitan area housing (especially lower priced housing) hard and curtailing price increases.
“If the banks could find more innovative ways of easing up on the tough National Credit Act criteria we could very quickly be back into 2007 boom conditions,” says Rawson. “In the USA increased bank lending has already revived the housing market with the result that March sales figures were the most satisfactory for 22 months.”
An indication of how strong the desire to own a home is can be gained from the fact that some buyers have been willing to negotiate an 80% bond with one bank and then take on two 10% loans with a different bank (one for the husband and one for the wife) at 25% interest rates, repayable over three years, to achieve a 100% loan.
“This really is hocking yourself to the limit – but it is far better than renting in perpetuity,” says Rawson.
“Buyers have also by and large accepted that rates, taxes and service costs will be far higher in future, but even this has not dampened their desire for home ownership.”
The Eurozone economic problems – coupled in the UK to the huge costs payable by BP on its Mexico Gulf spill – could lead to a no-growth scenario in many European countries and a limited growth scenario in the UK. Rawson says this in turn could lead to a renewed interest in SA property as an alternative investment channel.
“Although its impact has been over-emphasised, the World Cup event will, I think, lead a small percentage of visitors and TV viewers to investigate SA home buying.”
Rawson says potential buyers should take the preliminary step of seeing a bond originator to ascertain at what price level their applications are likely to be successful.
“Don’t fall into the trap of believing that your chances are nil, as some have done. Find out what the banks will approve and, if necessary, pitch your expectations lower initially. The important thing is to get onto the home owners’ ladder now while prices and interest rates are so low,” says Rawson.
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