Next large-scale property valuations would spell more bad news for home owners
Following a recent media report that the next large-scale national property valuation is on the cards, Seeff Chairman, Samuel Seeff says that if this is the case, it would indeed spell more bad news for home owners.
We are still in the down-cycle and the property market is nowhere near recovery. Flat trading volumes have kept average house prices down since their peak four years ago. Already, he says owners are burdened with rising basic living and utility costs and further property rate hikes will be difficult to absorb. This will also directly impact the already subdued demand in the real estate market.
An increase in property valuations while the market is still in a flat trajectory, he says will further undermine buyer confidence. While we understand the need to adjust property valuations in line with value growth, the reality is that there is been no noteworthy growth since the last major adjustments. It is an unusual situation that calls for a restrained approach on the part of municipal valuators and we would urge caution in this regard.
Household budgets are under enormous pressure. Electricity hikes over the past three years have been well over 20 percent per annum (24,8%, 25,8% and 25,9% for 2010, 2011 and 2012 respectively) while the basic fuel price is 19,81 percent higher than a year ago. On the back of this and other basic food cost hikes, it is not surprising that inflation is now hovering around 6%, up from 3,7% in January 2011. This, he says despite contracted job growth. The uncertainty around possible interest rate hikes is yet another factor that is keeping demand low.
While the ratio of debt to disposable income improved from around 82 percent in early 2011 to around 75 percent, it is difficult to anticipate a further significant improvement when consumers are faced with rising basic costs. What we need right now is some good news to get the national consciousness into a positive mindset and ignite economic and job growth. Once this starts, strength will return to the real estate market as demand and property prices will pick up and pave the way for an adjustment in property values and rates.