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CutbackStop eating out, slash new clothes spending, reduce the work time of domestic staff, forget holidays and husbands, roll up your sleeves and get stuck into helping with domestic duties, are all advanced by Nic van den Berg as key measures to prevent families being forced into selling their home or allowing their repossession by the banks. Such measures, van den Berg, owner broker of RE/MAX Jowic in Centurion, believes could reduce distressed household budgets by up to 25 percent and stave off permanent financial loss until interest rates decline or house price growth is restored, which in his view could be in about six to nine months time. Van den Berg, who operates in Centurion’s normally vibrant sectional title market, dominated by first time buyers or young families reports growing financial strain among purchasers having entered ownership in the last two years with a 100 or more percent home loan and handicaps of additional credit payments. The accumulative effect of five percentage points increases and harsher credit lending has seriously curtailed local property transactions, while at the same time boosting stock supply. The same buyer who purchased a home for R900 000 with a 100 percent loan pre-rate increases some two years ago, now only qualifies for purchases of up to R650 000. But current asking prices, in spite of the demanding, “means adjustment”, have stubbornly resisted such proportionate adjustment and are not likely to do so. The result, according to van den Berg, is that financially desperate home buyers are now faced with two choices: either reduce their selling price and sell at a loss or hand the property back to the bank. So far, at least within Centurion, the number of desperate cases remains relatively small, but van den Berg believes it could be even smaller if troubled homeowners focussed on “breadline” diets and ruthlessly applied strict financial disciplines, the first being staying at home. “As soon as you go out the front door the best laid financial plans fall apart,” he warns. The only credit spending justified in his view is roof over head and own transport to get to work. “Sure, it’s a fact that the property has lost value, but that’s only a paper loss not a monetary loss and that, given the historical appreciation of property is temporary and painless.” Jeanne van Jaarsveldt, finance and marketing director of RE/MAX of Southern Africa, also believes that a “teeth-gritting, back against the wall” stance is vital in the current market with no sacrifice, within reason, being too great, to hang onto ownership. “If you’ve made that great step into ownership don’t give it up as it will require an even more monumental effort to get back into the market.” Given the historical surges in property values, such as price gains soon after the market stagnation of 1998, van Jaarsveldt says the recovery in demand, while not likely to be as dramatic as that earlier period, will again be substantial. Like van den Berg, he believes six or nine months more of deprivation “will be worth it a hundred times over when the market turns.” |