'Property offers great value'

Johannesburg - Standard Bank's residential property gauge released on Tuesday shows that its median house price for South Africa came to R592 000 in December 2008, down from around R611 000 12 months earlier.

Standard Bank senior economist Johan Botha says the overall -0.3% drop in 2008 was the first annual decline recorded by Standard Bank since 1996. He adds: "The latest data reflects a very fragile property market."

Botha has little hope of any improvement in housing activity and house price levels anytime soon, despite the prospects of another 250 basis points cut in interest rates. "Clearly, the combination of slow economic growth, punitive debt levels and still high inflation in a general environment of plunging confidence, will continue to impact negatively on many segments of the economy, including the residential property market."

Standard Bank's latest house price figures are roughly in line with that of First National Bank, which recorded a drop of -1.7% in average house prices in December 2007.

Although Absa's figures were still in positive growth territory with a marginal rise of 1% in December 2008, the bank?s senior property analyst Jacques du Toit expects house prices to drop by around -2.5% in 2009.

While falling house prices are, of course, bad news for existing homeowners who now face decreasing property values, it does create buying opportunities for investors. Estate agents say that cash buyers in particular are now in a good position to negotiate sizeable discounts on asking prices.

Andrew Golding, CEO of Pam Golding Properties, says six months ago buyers and sellers were facing an impasse, with sellers being somewhat unrealistic in their expectations. "We are now seeing a definite shift in momentum, with urgent sellers realising they need to adjust their asking prices if they want to offload properties."

Golding says that trend is bringing more bargain buying opportunities to the fore. "It's no longer uncommon for opportunistic buyers to bag properties at offers of 10% to 15% below asking price."

Rael Levitt, CEO of auctioneers Alliance Group, puts it more bluntly: "Investors now have a once-in-a-decade opportunity to accumulate property assets at fantastic values."

Levitt says a flood of residential stock has hit the market since mid-2008, with the values of both forced and non-forced sellers dropping across the board. He expects market weakness to continue well into 2009.

Levitt maintains that in some pockets of the market, notably vacant land and second homes in coastal areas, prices are already 30% to 40% down on a year ago.

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- Fin24.com