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South African Property Market
The South African property market strength in 2012 will rely on the economic growth which should pick up before the sector can realise real growth.
According to Samuel Seeff, Seeff Properties chairman, the economy would need to pick up before we can expect to see any real strength returning to the property market.
He explains that the market will experience reasonable demand with a lot of meaningful gains in clearing distressed properties out of the market, albeit with little fortune.
“No further interest rate hikes are expected and this should help consumers reduce their debt levels by 2013,” he says.
He says while consumers will still buy and sell property, they expect to see low sales volumes given the continued financial constraints and high bank decline ratios.
Seeff says 2013 will be the time that we will see a restoration of activity in the South African real estate market to levels pre-2007 when the National Credit Act was introduced.
Throughout 2012, sellers will still be competing with distressed properties and they will need to price conservatively and take heed of real estate agents’ advice of the market as to what buyers are prepared to pay.
Cash buyers will have the upper hand and time to consider their options and are likely to negotiate the best possible price and, on their terms.
“It is my view that the pent up demand that has been in place since 2007 will start impacting on the market, assuming that the banks are able clear impairments and debt out of the market.”
Only once turnover in the market picks up, are we likely to see an uptick in prices, but this will be mild in strength and will remain as such throughout 2013 and 2014, he says.
He says Gauteng is the powerhouse of the market and usually first to feel strength returning to the market and this regional is set to improve this year.
As for coastal properties, especially the non-primary markets including holiday and second homes and leisure properties, he predicts the sustained lack of demand to continue until the primary markets across the country pick up.
Experts believes we can look forward to:
-GDP growth will remain relatively flat with predicted growth of between 2.5 percent and 3 percent for 2012
-Does not expect further interest rate drop, depending on inflation, he anticipates an interest rate hike
-house prices have already come down by between 15 and 20 percent from pre -2008 highs, no significant price drops expected. Prices and sales volumes are likely to ebb along throughout 2012
-for those property owners who are not in a hurry to sell, hold on to your property but if you have to sell, price conservatively as low demand will keep prices subdued
-residential rental yields are set to increase as those who cannot afford to buy will rent instead. Rental rates are likely to increase by between 8 percent and 10 percent.
-commercial rental yields are expected to increase by 8 percent on average as per standard annual escalations and demand will remain relatively subdued.
Meanwhile, Dr Andrew Golding, chief executive officer of the Pam Golding Property (PGP) group expects the leisure property to take longer to return to its glory days and recovery compared to the residential property sector.
PGP hopes to see an improvement in foreign investment and expects that foreigners who have traditionally found South African an attractive place to invest in property will continue to do so in increasing numbers.
“We hope to see numbers of transactions continuing to increase, hopefully with approximately a 10 percent increase over this year and prices will remain flat in real terms.”
Golding explains that this year estate agents across the country will have re-organised themselves into two separate organisations.
One will represent a labour component or employee component (the former Institute of Estate Agents) and the other represent business owners and principals (the so-called business component) REBOSA.
These two organisations will be able to represent in a fully inclusive way, the constituencies that they are designed to represent.
In this way the industry will be able to be in control of its own destiny and to speak with one unified voice and will be able to interact meaningfully and credibly with all the stakeholders, both government and non-governmental, he says.
From a regulatory perspective, PGP hopes this year doesn’t have as many regulatory implications and that the full effect of the Consumer Protection Act will have been bedded down and properly understood, he adds. – Denise Mhlanga
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