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How to weather the housing crisis
An Article by YDL Property Confidential 100 A cocktail of events have contributed to creating the "perfect storm" and some landlords are thus having a tough time. The next 18 - 24 months will be turbulent for the housing market. The consensus was that it will get worse before it gets better. But, both Ian Fife and John Loos were of the view that fundamentals are sound and that this is a temporary interruption. This view must be tempered by the possible impact of external factors such as the price of oil. The market is currently dominated by interest rates and the NCA, with 100% bonds more difficult to get and interest rate fatigue setting in (this will get worse in 2009). John is of the view that - in some respects - a cyclical recovery for residential property is near, but that "Tito keeps us waiting." FNB expects the prime rate to decrease in 2009 to an average of 14.8% (but with a "high rate scenario" of 17.6%, as opposed to a "global meltdown scenario" of 11.8%). The forecast for 2010 is 12.8%. Some house price deflation on a national level is anticipated later in 2008 and in 2009. In fact, Ian is of the view that prices may fall by 15% next year and that we'll be back in a boom by 2010. The opportunity for investors is that there will be lots of distressed sellers at the margin, particularly around Q2, 2009. The best ways to make use of this opportunity was discussed, including which areas will be the best to invest in. Off shore markets will slump longer, with the UK possibly taking up to 2013 before a full recovery. The point was made that there are opportunities for good deals in hard currency, with the Euro the best long term bet. |