By Bright Madera
THE property market bubble in 2009 is about to burst due to a decline in property prices on the local market.
Investors are unclear as to whether the current market prices for properties have bottomed out, or there still exists a downward potential in price movement.
Uncertainty on the direction of property prices has brought in indecisiveness as buyers and sellers remain skeptical.
Between February and September this year, residential property prices on the local market, depending on its quality and location, shed off between 30 percent and 50 percent from their previous year’s prices.
Kingdom Stock Brokers said, "It is our strong assertion that the current market prices offer the greatest opportunity for buyers to acquire properties at a discount to their intrinsic values.
"Once the economy improves from its current situation as largely expected, building societies are anticipated to resuscitate mortgage financing thereby boosting the currently subdued demand".
Going forward, on the back of improved liquidity on the economy, property prices are bound to firm from their current levels because of limited property stock brought about by a decade of inactivity in the property development sector.
While low activity has been attributed to low liquidity levels, some prospective buyers are still waiting for the market to really bottom out before they come in.
The tragedy with the property market, like any other risk markets such as the equities market, is that investors will never be able to establish with certainty whether the market has reached its peak or its rock bottom.
However, the prevailing liquidity shortages that have constrained demand on the property sector make it a ‘buyers market’.
The few available buyers have the upper leverage to negotiate and get properties at a bargain.
Some analysts say because of the absence in mortgage finance, the market might further slide by as much as 15 percent from current levels.
Meanwhile — construction is still struggling
to lift up even though material prices have come down from 2008 levels and availability improved.
Building materials are still expensive in the country compared to the region.
Although basic materials such as cement and bricks are now reasonably priced, the majority of finishing materials are still imported and expensive.
Prospects of building material prices further coming down are there and developers might want to use this time to buy land and develop later when construction costs are reasonable and property prices are on the rise again.
Labels: REAL ESTATE