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Fuel hikes to hit housing market

Johannesburg - Auction Alliance CEO Rael Levitt said on Wednesday that petrol price hikes are likely to affect the housing market recovery.

He said that historically, South African families look to move to larger homes.

Those homes tend to be further away from the city and higher transport costs would be a factor, especially in the lower- and middle-income segments of the market. These two groups make up the bulk of the market, he said.

"You might think fuel and transportation prices are a poor excuse for another dip in housing, but they're not," said Levitt.

Levitt said that existing home sales in the first quarter of the year appear to be dropping and sales of newly constructed properties are weak.

"The year has started on a fizzle and recovery is still coming," he said.

A weaker recovery is not confined to South Africa.

Levitt said that last week a new survey in the US from MacroMarkets showed that of 111 housing market experts and economists surveyed, nearly half expected a double-dip in home prices this year.

"Not a single expert expects US national home prices to recover to the pre-bubble trend in the coming five years."

In December, only 15% projected that a new post-crash low would materialise for home prices. They are now less than 1% away from that mark, according to the survey.

The sentiment among US experts continues to deteriorate, Levitt said.

"Now they are expecting only a weak recovery, and even that is not until 2013."

Levitt said that SA may not be that dissimilar, and uncertainty in Japan and trouble in Libya will directly affect the housing recovery.

"We expect home sales to remain soft in the short term, given uninspiring leading indicators. If consumer sentiment remains poor and home buyers are fearful, this will stunt the recovery."

According to Levitt, house buyers are looking at the weakness in the economy, they are concerned about interest rate hikes and they're asking: Is this a good time to borrow R1m to buy a house?
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