Property investors with a portfolio of properties and shortfalls that they can barely sustain, are hanging on in the hope of market recovery and the closest hope they see is 2010.
But are the 2010 events anything to base hopes on?
If 2010 sentiment brings any sort of recovery, which is doubtful due to further forecast of interest rate increases, is it sustainable?
The year 2010 is just around the corner. Taking into consideration that the property market doesn't move either up or down very fast, as opposed to the stock market, first of all I think it needs more than just the sentiment of 2010 to reach any sort of visible recovery, where transactions of property buying and selling increase all of the sudden to any significant extent.
One must remember that a depressed market is a market nonetheless. In other words, people right now are buying and selling property, but not as much as before. A recovery would mean more sales and significant enough to call them even the start of a recovery. Nationally to reach such numbers, takes more than some think. Just because one sees sold boards that does not mean that the market is less depressed than yesterday.
Then I have another fundamental problem with 2010. The NCA, new mortgage bond terms given by the banks (which I spoke about in my previous posts), the increases in interest rates which have a negative affect on affordability are not easily just pushed aside with a positive 2010 sentiment. In my opinion, it just needs more than 2010 positive sentiment to have any sort of visible recovery in the residential property market.
In addition to which the negative and unforeseen circumstances of the global economy could of not easily been predicted by anybody, but nevertheless are compounding the affects of slow down caused by all the above mentioned issues that property purchasers already must deal with.
Furthermore, and assuming that 2010 sentiment will actually have a positive affect, even if mild for that matter, is it sustainable?
What happens after 2010? Are we eluding ourselves in purchases of properties that 2010 will recover the market and then find ourselves back at the beginning, in a depressed market and with more home loans to service?
I think that the 2010 prediction of recovery for the residential property market are not sustainable even if they occur. Furthermore, it will need more in my opinion than just sentiment to recover the residential property market. Good sentiments for the 2010 events won't change the interest rates, won't change the NCA, won't increase affordability nor change the banking system to give more loans all of the sudden at better rates and conditions.
Therefore, anyone thinking that 2010 would be the recovery, or save portfolios that are struggling, may just find themselves disappointed.
Like in any market, (remember the dot com boom and doom), looking at just one factor without taking into consideration of all the fundamentals or ignoring other major factors, can lead to wrong property purchasing decisions.
About the Author:
Sean Wheller is a real estate agent, investor and the founder of the largest online
property investing education website in South Africa that specializes in
real estate training, and
property investing courses and seminars.
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Date Published :
Nov 25 2008