The recent negative growth in real house prices meant more than 200 000 home owners were probably stuck in a negative equity situation, where the value of their outstanding loan exceeded the value of their homes.
Rael Levitt, the chief executive of Auction Alliance, said yesterday a further 300 000 home owners were either behind on their payments or already in the foreclosure process. Levitt said the housing market had deteriorated this year after improving following the slump in 2009 and was now showing signs of entering “a double dip”.
He said the amount of equity in South African homes had plummeted from the top of the boom in the first quarter of 2007 to the end of last year.
Levitt said mortgage bond foreclosures by banks had dropped by at least 40 percent between 2009 and last year and the housing market was picking up, but price deflation had caused home owners to be in a negative equity situation and prices continued to fall despite the lack of new supply.
“The pressure on prices is not about to let up given weak demand and a huge overhang of properties on the way to market,” he added.
Levitt stressed this was the market situation now with historically low interest rates but any increase in rates, as anticipated later this year or early next year, could be “a new tipping point”.
He believes a dramatic “bounce” in house prices is unlikely in the next 18 months because of huge uncertainties over the strength of the economic recovery, employment growth and the availability of credit and a sluggish recovery looked more probable.
Jacques du Toit, a senior property analyst at Absa, said the housing market was “not a particularly positive story at the moment”.
Du Toit attributed this largely to the state of consumer finances. - Business Report