Last week's interest rates cut by 100 basis point may help stimulate the property market if banks ease up on their lending criteria.
So says Leapfrog Property Group managing director Bruce Swain. He was reacting to the Reserve Bank's one percent cut in its repo rate last Thursday.
Though praising the move as good news for people with interest-bearing debt, he said that he did not however see it stimulating the property market dramatically because banks would not ease up on their lending criteria.
Swain says as long as the average home loan deposit, which currently runs at between 15percent and 20percent of the purchase price, remains in place, this will impact on people's affordability.
For example, to buy a moderate home of about, say, R800000 you need R220000, which is R160000 deposit and transfer duty.
But the good news is that taking inflation into account, property prices have softened in effective terms though the industry has still not seen property prices falling dramatically.
"Obviously they're softer than a year or two ago, but despite the current difficult market, there were no dramatic price drops of 25percent and 30percent," Swain says.
While the interest rate cut should be welcomed, much more is needed to stimulate the revival of the residential property market, he says.
Swain says that the most important stimulus to jump-start the real estate market is the enablement of people living in properties that at the moment cannot be registered at the Deeds Office. Also, where individual property rights do not exist such as informal settlements and tribal land. Lower transfer duties, as well as the revision of capital gains tax, are other possible measures.
Swain says that the government should also refrain from providing housing, but leave it to experienced developers who have proven track records to do it.
His advice to estate agents in the residential property market is to qualify buyers and sellers properly.
"Make sure sellers are motivated to sell and that they will consider reasonable offers.
"Too many people are coming into the market, dipping their toes in the water just to feel the temperature, but they are not really looking at selling," Swain says.
As advertising is expensive, he advises agents to qualify their sellers, understand their motivation for selling, and price property according to market conditions.
Buyers on the other hand must be qualified, particularly from an affordability point of view.
"Too many agents just run around, show people properties and put in an offer, which is turned down by the bank. In the process, all they do is irritate the seller."
He says communication is very important.
"An agent should know exactly what the seller's needs are and also that the buyer can afford the property and is buying in the right area.
"To give sound advice and assist a client as far as possible in obtaining the right property in the right area is the very reason they are in the property business," Swain says.
He says properties on the market for more than 80 days are a "clear indication that they are over-priced.
Agents who continue to advertise properties for 12 to 18 months at non-market related prices end up sitting with a dead duck precisely because sellers have unrealistic expectations".