South Africa to weather the credit crunch storm, bank predicts

The South African residential property market is expected to experience a relatively mild downturn rather than a huge dive, according to a leading bank.

It is good news for those who have property in South Africa as it had been predicted the country would suffer like the USA and UK.

Talk of recession is dismissed by Sizwe Nxedlana, property economist with Standard Bank. 'Our analysis of the sources of the recession in the US housing market and its subsequent transmission to the rest of the US economy suggests that South African residential property will experience a relatively mild cyclical downturn rather than a full blown recession,' he said.

The Standard Bank median house price index recorded negative year-on-year growth for the second consecutive month in March. The Standard Bank median house price fell to 530,000 rand in April from 550,000 rand in March.

But the April median house price of 530,000 rand translates into a growth rate of -8.6% year-on-year when compared to the median price recorded in April 2007.

Leon Barnard, director Standard Bank's Personal and Business Banking Products, said that property remains one of the best investments around despite higher inflation and interest rates.

'There is no denying that property prices have cooled off dramatically in the past few months as a consequence of economic pressures. While these numbers might raise some concern it is not all doom and gloom.

'It is the upper most sector of the property market that has cooled off the most. We are starting to see increased levels of activity in the lower property segments. Standard Bank is actually quite pleased with the performance and resilience currently being seen in the lower spectrums of the property market.'

Real estate agents are backing the bank's stance. Dr Willie Marais, national president of the Institute of Estate Agents (IEASA) of South Africa, said they would be focusing on bolstering consumers' confidence, and doing more to help them understand the underlying strength of the SA property market.

'As an industry, we should make it our business to counter all the negative reports on the property market with factual, positive news. There is still a lot of business being conducted in this market and behind every transaction is a consumer 'success story' that other consumers need to see and hear,' he said.