The Property Crises. Might get worse before it gets better.

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While there is evidence that a new property market is beginning to emerge in terms of investment into low priced housing,it is still an undisputed fact that things are likely to get worse before they get better.

Some experts say that the current blow to the property market is the worst in 25 years.half built homes are dotted all around since owners and builders have run out of funds due to the economic climate. A recent international report by US economists Carmen Reinhart and Kenneth Roghoff stating that house prices take six years to recover following major financial crises, market analysts have called on the government to intervene.
Keeping in mind that we are looking at a recovery time of 6 years, thousands of artisans in this field of employ could be out of work placing an even bigger burden on the economic situation.

Master Builders Association Eastern Cape head Greg Steele states that for many builders it is the worst downturn in their careers. In fact, there has been a drop of 20% in the number of formal business sector employees – and the informal sector has probably been hit much harder. By the end of 2008 it was evident that the industry was slowing down, but with the advent of 2009 it became very clear that work was going to very scarce going forward.
According to Stats SA, building plans passed for residential developments nationally dropped 44% between January and May this year when compared with the same period last year.

Banks originally forecast that prices would only fall by about 4% in real terms, but in reality it has exceeded 11% over the past year alone. In fact, some auction houses report that the the true figure is down 20% – 30%. In many cases houses are worth less than what they cost the buyer originally.
Property analysts predict that prices are to fall more than 12% this year, and thereafter between 10 – 11% per annum. The Reinhart Roghoff report states an average decline of 35% over 6 years.

The development of new property will not start up again until the gap has been taken up in the market of existing and vacant properties. This partially explains the rekindled interest in second hand properties. However, it is expected that this process will take a minimum of 2 years if not longer.