Property often remains one of the few investments that most people have a vested interest in, so when the housing market hits a trough, as it has this year, its not just the economists’ interest that is peaked.

The furore that was sparked earlier this year when Lew Geffen - chairman of realtor Lew Geffen Sotheby's International - claimed that the highest house prices could drop by as much as 40% was a perfect soundbite for the property-conscious general public.

While this claim has largely been dismissed now, a lot of South African’s still have one eye on property market headlines, as they await news of when the market has bottomed out, and when is the right time to get back in.

The rapid rise in the repo interest rate over the last two years, up from 7% in June 2006 to its current 12%, has made the cost of financing a property unmanageable for many, though the dominant theme emerging from talk on rates is now when they will come down.

“We do believe that interest rates have probably reached their peak,” says Nicky Weimar, senior economist at Nedbank, adding that with the first rate cut expected to occur in April next year, “interest rates should end 2009 about 200 basis points down from the current level.”

That being the case South Africans can expect an interest rate of 10% by the end of next year. John Loos, Commercial Banking Strategist at FNB, also says he expects “rates to be cut in the first half of next year.”

Many economists and property commentators say that the turn in interest rates will herald the return of buyers to the residential market, so with rates likely to come down early next year, does that mean the housing market has bottomed out?

“I don’t think we’re quite at the bottom of the residential cycle yet,” says Loos, “but we will be within the next few months or so.”

Andrew Golding, chief executive of real estate firm Pam Golding, warns that there are two factors to take into consideration when calculating the opportune time to get back into a falling housing market.

“The first is a transactional issue – this probably has bottomed out. Transactions are probably between 30 to 40%, in some cases 50%, below last year,” says Golding, adding that “the number of transactions will start to increase.”

However, Golding retains a more cautious stance on the issue of pricing. “I’m not sure that we’ve seen prices bottom out yet, I think there’s still some way to go until the market turns again. I would say the bottoming out, in terms of prices, is still between 6 to 9 months away.”

That being said, Golding says that Pam Golding has seen an improvement in the last 4 to 6 weeks. “Buyers that have the cash ready are in a strong negotiating position and are making use of the opportunities right now. There are significant opportunities for buyers.”

“There are two broad categories of sellers. Those that don’t need to sell and can wait for the price they want; and those that have to sell,” says Golding. “Those that have to sell are being more realistic now,” he adds.

Like any investment, there is always dissension when it comes to accurate predictions; however John Loos notes that while there could still be some way to go before prices actually bottom out, this isn’t necessarily a deterrent for investors looking to get into the market.

“You mustn’t count residential property out, from a point of view of getting into the market. The good time to get into residential property is probably just about here" - John Loos

“You mustn’t count residential property out, from a point of view of getting into the market. The good time to get into residential property is probably just about here, as residential is probably near the bottom of the cycle,” says Loos.

Loos also expects to see a recovery in the middle of next year. “It won’t be the boom that we saw in the last few years, but I think from 2010 we’ll see growth in double digits,” he says, adding that any rise would be in the high-teens rather than the 20’s.

Erwin Rode, of property consultancy Rode & Associates, is less optimistic. “Nobody can predict when the turning point will be, because it partially depends on factors completely out of South Africa’s control, namely when the South African economy will start its cyclical upswing, not to mention the vagaries of the world economy.”

This has become even more apparent in recent weeks, with the collapse of another US investment bank, Lehman Brothers, the knock-on effect of which has seen the rand depreciate as global investors become more cautious.

“Estate agents tend to look at the market from a sales-turnover point of view. I look at it from a price-movement point of view,” says Rode. “Either way, we must all recognise that the good times of the last eight years won’t be repeated soon.”

While an investment in the property market is still a risk, Andrew Golding says the best investment for buy-to-let investors at the moment is inner-city developments between R1m and R2m, as “the rental yield in these developments is higher relative to other areas.”

Once again, Rode urges caution for property investors expecting a big return. “Don’t expect a boom, in real terms, in residential rentals. At best it could maybe beat inflation by 1 or 2 percentage points – if buy-to-letters are lucky.”

For investors with the capital, however, there are areas of the property market that all economists seem to agree will deliver good returns.

“Fundamentally, commercial and industrial properties should boom for many years to come, provided the economy keeps ticking over at, say, 3% per annum,” says Rode.

John Loos notes that industrial property has been excelling for some time now, with three years of above 30% returns, though he says that this figure will dip quite significantly this year.

The least affected sector in property is likely to be office space, says Loos, though returns this year will be lower than the 30% seen in recent years. “Office property will slow, but it will slow down the least. After next year I think we’ll see a couple of years of above 30% returns in office space.”

Andrew Golding says that while “there are significant opportunities in commercial”, he cautions against any attempt to draw a parallel between the commercial and residential property sectors, as the two are “fundamentally disconnected from each other.”

For any potential investor it is clear that one cannot accurately predict the property market. While the consensus remains that office space is likely to outperform in the near-term, there is still dissension over the outlook for residential prices.

John Loos suggests that residential investors should begin readying themselves for a move back into the market, as we are probably near the bottom of the cycle, while Andrew Golding says the end of the downward pricing cycle is still up to 9 months away, and Erwin Rode urges caution against hopes of high returns from residential property.

Either way, with interest rates – the decisive factor in financing the cost of a property – on hold now, and expected to come down early next year, it seems that residential property can’t be counted out just yet.