Mixed views on home prospects

Johannesburg - The local residential property sector is out of the woods and can count on at least 8% growth in 2010, according to FNB's home loans division.

In its monthly Residential Property Index, FNB said house prices increased from 3.6% year-on-year in January to 5.8% in February.

"The existing home market is a happier place these days," said said John Loos, FNB's home loans strategist. "It's arguably past its worst state of health, as demand grows and the acceleration in house price inflation continues."

According to Loos, the five percentage point cut in interest rates since 2009 will continue to boost house prices until the middle of 2010. Average growth of 8% for year is expected, said Loos.

"There's no controversy that the house market has turned around," said Erwin Rode, property valuer and economist at Rode & Associates. "But the concern is [industry] players will deduce everything is back to normal and that we're going to have another boom." Rode predicted house prices will continue to grow at a slower pace than inflation for up to five years.

FNB's statistics showed real house prices were deflating by 2.4% in January.

"There's just too much pressure on the consumer," said Rode.

According to figures released earlier by Standard Bank's home loans department, consumers are still in a debt dilemma.

Of the 18.01 million credit active consumers at the end of September 2009, only 9.9 million (55%) were in good standing. Three million (17%) were more than three months in arrears, and 2.7 million (15%) landed up on adverse listings.

According to FNB, developed economies' economic stimulus packages will start to get scaled down, and locally the effect of interest rate cuts will wear thin.

"It then remains to be seen whether our property market [has] regained enough strength to survive without these 'oxygen tanks'," said Loos.

- Fin24.com