AFTER a severe knock during this year's recession, residential property prices are expected to start picking up from March next year.

This according to Marius Marais, chief executive of FNB Housing Finance, who outlined to Sowetan the recent behaviour of the housing market and its prospects for next year.

Marais said more than 504 homes were repossessed between May and October this year.

Most of the repossessed properties range from R300000 to R600000, which is categorised as the affordable housing market.

"We are still in the downturn cycle. The latest property index indicates a lower monthly decrease in property prices," Marais said.

"Our experience is that house prices in the affordable housing market take up to 12 months to react to changes in the interest rate cycle.

"So it is safe to say that current property prices in the affordable housing market reflect the impact of the 15,5percent interest rate of a year ago," Marais. said.

"Based on this model we expect housing prices to increase only from March 2010 on.

"But the recovery will be mild compared to the downward adjustments of the current cycle," Marais predicted.

He said there was no property boom in the pipeline because banks had tightened their credit criteria.

"Increases in living expenses and expected electricity increases will escalate the need for credit and thus reduce borrowing capacity in the affordable housing market.

"We are offering our customers loan cover which pays up to six months of their bond instalments should they be retrenched," Marais said.