Buyers Being Pushed out Rural Market - 05-05-09

May 5 - Despite that fact that interest rates were cut again last week, there are certain sectors of the property market that are still struggling to cope.

The rural market in particular has been badly affected by the National Credit Act and the increased demands by banks for high deposits before they are prepared to offer funding.

Many buyers in the rural market, whose salaries don't fit those who earn in the bigger centers of South Africa, are now being forced out as home buying is simply not an affordable option at present.

"Banks now require a 10% deposit on residential properties and up to 50% on commercial properties, which is pushing many prospective buyers out of the market," said Brent Haynes of the Aida Bethlehem franchise in Free State. "Not many local buyers manage to come up with the required deposits. In Bethlehem for instance, salaries average between R3K and R7K a month, leaving little room to save the required R80K deposit on an average family home."

One thing that is sure to help alleviate the problem somewhat, according to Haynes, is more interest rate cuts as we have been seeing since December last year. "Lower bond payments will improve affordability and at least make it easier for existing homeowners to cover their monthly bond repayments," he said.

Naturally, this has seen a rise in the demand for rental properties in the Bethlehem and greater Free State regions, with some home owners even selling their properties on the condition that they can continue to rent their homes back for an agreed upon amount to the new owner.