The latest round of interest rate increases is going to slow down the property market as consumers sit tight on their properties, says property economist Erwin Rode.
In a stagnant economy rising interest rates are bad for property prices because property becomes more expensive.
"We were expecting a nice growth phase in property prices next year, but the latest increases in interest rates have dashed hopes of that.
House prices are likely to drop this year by two percent in real terms (taking inflation into account) and next year by four percent, he says.
Another factor which will adversely affect the property market is the new lending criteria of banks.
New bank rules, set by the Registrar of Banks, may make it more difficult to get a 100 percent home loan from October this year.
Banks will probably lend you only 80 percent of the value of the property you intend buying. Alternatively you may be charged a higher interest rate on the balance of the value of the property.
A third factor that is slowing down the property market is the recent restructuring of civil servants' home loans.
Before March this year, civil servants were able to buy bigger or more expensive properties than employees in the private sector. This is because of the way banks calculated what civil servants could afford to pay.
From November this year, civil servants will be treated the same as other borrowers. This will affect demand for houses and will put pressure on prices, Rode says.