Banks: Prices are going to double! We swear!

Moneyweb has another article full of bank economists promising housing prices are going nowhere but up!

Doubling your money in 5 years

Want to turn R500 000 into R1m in 5 years? Property - particularly affordable housing - is the place to be.

That's according to those who are ploughing big money into bricks and mortar, like property developers. But even life assurers, who have an interest in promoting other asset classes and investments, are seeing the returns to be had in property.

People with a vested interest in prices going up are saying prices will go up? Who would've guessed.

As I asked in the comments section of that article:

Are salaries going to double in 5 years time as well? Or will those entering the market then (todays 17-20 year olds) be straight out of luck and destined to rent forever?

Somehow I doubt it.

Meanwhile: "South Africa's net savings rate is currently below zero, making the country even more dependent on foreign flows to fund economic growth."

Up and Down and Up

This apartment has been on sale since April 2007 (if not earlier). It was initially for sale for R1 465 000, then reduced to R1 395 000 and now is back up to R1 425 000. Because when no one wants to buy at R1 395 000 your best bet is to raise the price R30 000.

Rent Vs. Buy: CBD

We haven't done any of these for a while. And remember the rental income is before rates, maintenance, taxes and vacancy.

Upmarket Apartment In the Cbd For Sale: Sale price R1 575 000. Currently rented for R5700.

Down Payment	Monthly Payment	Cash flow	Annual Income	ROI
R0	R19016.15	R-13316.15	R-159793.82
R157500	R17114.54	R-11414.54	R-136974.43	-86.97%
R315000	R15212.92	R-9512.92	R-114155.05	-36.24%
R472500	R13311.31	R-7611.31	R-91335.67	-19.33%
R630000	R11409.69	R-5709.69	R-68516.29	-10.88%
R787500	R9508.08	R-3808.08	R-45696.91	-5.80%
R945000	R7606.46	R-1906.46	R-22877.53	-2.42%
R1102500	R5704.85	R-4.85	R-58.14	-0.01%
R1260000	R3803.23	R1896.77	R22761.24	1.81%
R1417500	R1901.62	R3798.38	R45580.62	3.22%
R1575000	R0.00	R5700.00	R68400.00	4.34%

Fully leveraged you're only going to lose R160 000 a year. And even if you pay the full asking price you'll get a whopping 4.34% annual return on investment. Even putting down a R1 million downpayment loses you money...

Buyers Market? Hardly

In a bid to get someone to buy a house business banks are already calling it a buyers market in the residential property sector. Please don't believe the bulldust. It's a buyers market when prices have reverted to the historical mean and sellers are still forced to discount. A 6 year property bubble does not unwind in 3 weeks.

Reserve Bank Raises Rates

Prime lending rate is now 13.5%. And there's another on the way.

An Anecdote

privateproperty.co.za sends me an email with the properties that are on show in the areas I am tracking. Usually it's one property every month or so. Today's email? Four.

Selling A House Becoming Difficult

Homeowners struggling to sell their property

Three out of four residential properties are now being sold for less than the asking price and the average time a home remains on the market before it is sold has increased from eight to 10 weeks.

Jan Kleynhans, the chief executive of First National Bank (FNB) Home Loans, yesterday attributed changes in the market predominantly to the implementation of the National Credit Act in June and the cumulative effect of interest rate hikes over the past year.

Market activity is now at its lowest level since the inception of the FNB Property Barometer survey in 2003.

Why Is No One Buying This Fantastic Opportunity?

Back in June we spotlighted this house for sale for R1 050 000 (and renting for R4500, with 5% ROI), with the ad claiming that the property price would double in less than four years. Of course we wondered why anyone would sell such a fantastic investment returning 25% per annum. Well guess what, it's still for sale. I wonder why no one is buying. That 25% growth is in the bag! And with that R4500 rental income you'll only be losing R65 000 a year with 20% downpayment.

And So It Begins...

Property prices tumble

Residential property prices have tumbled since May, according to Standard Bank's (JSE:SBK) latest Residential Property Gauge - but the bank's economists say there is no cause for alarm.

The bank says there is probably a "bit of a problem with the data", with the National Credit Act (NCA) among the factors skewing the picture.

According to Standard Bank's figures, released last week, the median house price fell back to R585 000 in July, down from R620 000 in June - a drop not far off 6%. The figure for May was R600 000.

A 6% drop in a month?!?!? But of course according to the banks everything is peachy keen.

Two More Rate Hikes Coming

Market expects two more rate hikes

Banks expect interest rates to rise in the short term. They are currently paying nearly a percentage point more for 12-month funding than they are for three. This indicates that they are expecting two more 50 basis point rate hikes, says Coronation (JSE: CML) money market manager Tania Miglietta.