Why Are House Prices Falling?

Property Finance News:

Falling house prices are usually a sign that the supply of homes for sale has exceeded demand. In other words, the number of homeowners looking to sell their properties exceeds the number of buyers in the market.

The unique thing about the current condition of the South African property market is that, the demand for properties is actually not very low. The problem lies with buyers not being able to secure the necessary home loans.

In SA, home loans of up to 108% were very common up until a year or two ago. Since then buyers have had to put down at least a 10% deposit, before being granted the finance to purchase their new properties.

But, this situation is slowly starting to change again. And there are now ways to secure a full bond of up to 100% of the purchase price with the banks. One of these is a product called Pension Supported Home Loans (PSHL).

Pension Supported Housing Loans are loans offered to members of a pension or provident fund for the purpose of buying or building a house or making improvements to an existing home.

The other reason house prices are falling is seasonal. The summer season, when gardens look beautiful and thousands of South Africans transfer to new homes, is over and the winter drought will set in. But demand will return as spring arrives again.

Add to this an expected 2.5% cut in interest rates and we should see healthy property price growth by 2010.

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