The latest home loan rate cuts should read as a warning by those feverishly investing in property instead of stocks and shares. "The residential property market is overheating, with every 1% point rate cut being taken by sellers as a signal to raise their asking prices by between
5% and 10% even though there is no actual increase in the underlying value of their properties," says Lew Geffen, head of Sotheby's international Realty in South Africa.
"What is more, we have seen the number of new prospective homeowners coming into the market decline by 50% in the past two months".
Consequently, he says, inexperienced investors who are currently buying up parcels of stands or GASH (good address, small home) properties in new developments and hoping to make quick, stock-exchange type returns on resales are liable to be disappointed.
"Many of those now coming to the market as investors are looking to make returns of between 20% and 30% within a year. But in the majority of cases, that's just not going to happen. "What is more, if they hold out for the resale price they want, based on the perception that home buyers will pay more because they can afford more, they are likely to get stuck with their investment properties.
The supply / demand ratio is already shifting in favour of buyers, especially above R700 000." Such investors are unlikely to benefit by converting to a buy-to-let strategy. "The rental market has been hammered as declining rates made it cheaper for tenants to buy than to rent and an oversupply situation is already developing in this sector."

Beeld Huisgids 21 Nov 2003.