The recent spate of interest rate hikes has had a marked effect on the property market in South Africa, with liquidations and other distressed sales reaching all time highs.Demand outstrips supplyWhat is remarkable is that the demand for property continues to outstrip the supply by a significant margin and homes in the upper end of the market continue to realize attractive prices, particularly in areas like Llandudno, Hout Bay and Clifton.Ironically, the property owners that are really feeling the unprecedented heat of the consecutive rates increases are those who bought at the height of the boom as speculative buyers with the view of making a small fortune and quickly.Speculative buyers feel the pinchThe vast majority of these speculative home owners opted to borrow finance for the transaction but when the market plummeted recently and interest rates kept on rollicking upwards they were caught between the proverbial rock and a very hard place.They were unable to sustain the ever burgeoning mortgage bond, nor could they recoup their initial investment and although this was all bad news for the ‘punter’, it did have a positive spin in pushing house prices down to a more affordable level.Middle income home owners sufferIt is also those in the middle income group – those who’ve invested in property between R3 – R6 million – who have been mortally wounded by the constant rates hikes. They are those unable to pay cash and each time the rates increase, the variance is significant enough to cause them serious pain.One bit of good news directly related to this unfortunate situation for many is that mid-income house prices have flattened out with the overall price growth for 2008 estimated at less than 10%. It is clearly a buyer’s market and people with the cash to invest will most certainly be able to pick up some fantastic deals.Top end of the market remains robust The top end of the market – homes of over R10 million – has yet to show any signs of distress. This is largely due to the fact that principal buyers are either cash-flush locals or currency-rich foreigners who are able to pay cash for their investment.Estate agents in South Africa continue to register and report ever-increasing high-value deals in certain areas of the country. The average price for a Llandudno property, for instance, is now well over R10 million, and you can’t buy an ordinary Hout Bay home for less than R5 million – these are 2 areas in Cape Town that are largely immune to the negative impact of rates increases.Sandhurst and Hurlingham in Johannesburg and Balito in Durban continue to attract sumptuous prices and real estate agents have reported growth, albeit slow growth, in the upper end of the residential market.Light at the end of the tunnel Experts have predicted that 2008 could very well be the trough of the property cycle and, looking towards 2011 and beyond, an upward trend in price growth is expected. This, together with an improved economy, an exciting yet stable political landscape and lower interest rates can only mean that we have probably experienced the worst of the crisis and there is an imminent sterling silver-lined cloud ahead.