Although the year is starting with strong indications that the economic emergency measures taken last year have by and large been successful, caution still prevails.

So says Martin Schultheiss, CEO of Harcourts Africa, who adds that economists are divided on the sustainability of the recovery and the prospects for economic growth in 2010.

"Which is of course good news for serious homebuyers and property investors, because as long as there is this uncertainty, central banks will tend to keep interest rates down and make it easier to afford new purchases and qualify for home loans.

"Once the world economy does return to higher growth rates, we are likely to see the banks start raising rates again to curb inflation, which will of course put limits on the buying opportunities that are currently evident – and limit the chance for consumers to benefit from the expected 25% to 30% increase in property values over the next three years."

As for the property market itself, Schultheiss foresees the following in the year ahead:

- Interest rates are currently at a 28-year low and unlikely to drop much further. In fact, they will probably start to rise again at the end of the year. The next few months will thus be the best time for homebuyers to obtain loans, and could be a good time for existing borrowers to fix their rates.

- Affordability of property should increase steadily this year as consumers continue to pay down debt and salaries start to increase in line with greater economic growth.

- Population growth, economic empowerment and increasing prosperity will also stimulate demand among owner-buyers in established markets. However, stringent home loan qualification criteria will ensure that the rental market stays active and strong, and this will encourage investment.

- New residential property markets will continue to be opened up by mining and industrial ventures, tourism and infrastructure development, and activity will be less concentrated in the main metropoles. Some speculation is likely to be evident in these new markets.

- Security and personal safety will remain major purchase considerations and an increasing percentage of buyers are likely to choose homes in gated villages and estates. This will emphasise the importance of good legislation to regulate sectional title and/or community living and resolve disputes quickly and cheaply.

Lew Geffen, chairman of Sotheby's International Realty in SA, says big ticket sales are back with a bang. "Stock is being taken up fast, even in the most expensive suburbs of Johannesburg and along Cape Town's Atlantic Seaboard. Several really upmarket homes that had been on the market for around 18 months have recently been sold."

In short, Geffen says, the market is rapidly normalising towards a supply and demand balance, and house prices can be expected to return to the traditional average growth rate of around 9% this year.

"It's as though the market is trying to make up for lost time now, and lower interest rates and greater affordability are definitely playing a strong role in this. But there are also other influences in play – not least the fact that the banks are definitely committed again to the home loans market, and competing strongly for market share even as they maintain caution in determining who they should lend to. This means that those borrowers who do have good credit records and sufficient disposable income can once again shop around for the best mortgage options.

"In addition, there are many investors out there who are determined not to be left out of the next property upswing and have an appetite to buy quickly at current prices because they realise the market has already turned."

However, says Geffen, in this scenario one can also expect new development to start again, and bring new stock on to the market that will keep prices very competitive. "Certainly, home sellers and investors should not be expecting the 20 and 30% annual price growth that we saw during the most recent property boom, which is actually unhealthy for the market.

"What they should be able to expect, however, is steady growth that beats inflation, and we believe 2010 will put the market firmly back on its feet ahead of a long period of such growth."

"The recession is officially over, which means that job opportunities will start to increase this year, salaries will start to rise again and the demand for homes will also go up," says Young Carr, CEO of the Aida real estate franchising group.

"That means, in turn, that the oversupply of stock will be absorbed and price growth will start to gain real traction. At the same time, however, there will still be many who cannot qualify for home finance under the strict new credit law and must therefore rent.

"So, especially with interest rates at their current low levels, now is an excellent time for serious real estate investors to re-enter the market. The economists are predicting that property values will rise at least 30% over the next three years and between now and then, those who let their investment properties are also likely to achieve very good rental returns."

Carr says Aida agents in many areas are already reporting a significant increase in the number of sales taking place on the back of a surge in confidence that started back in September. "Consequently, we are positive this is going to be a sterling year for real estate." – Eugene Brink

For more information contact Martin Schultheiss on 031 201 1060 or send an email. Click here to visit the website.

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