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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While each home buyer will have their own criteria as to what their home must have based on their life stage and personal preference, there are a few key elements that home buyer’s in the current market seem to agree on, RE/MAX of Southern Africa.

The right price

According to RE/MAX the first thing that the majority home buyers must have is an affordable price tag, especially first-time home buyers because they often don’t have the equity from selling a property to roll into the next purchase. Although aspects such as space and the aesthetic appeal of the home are important, for most part the financial elements and affordability are top priorities.

“It is important for buyers to have a budget and make sure they stick with what they can afford. Buyers shouldn’t overextend themselves in the current market as it is highly likely that if they do, they will experience financial pressure in the foreseeable future. With house prices decreasing over the past few years, as well as the current low interest rates, properties that were previously unaffordable to many home buyers are now within reach. This has significantly opened up the market to buyers who now have more options available to them while still managing to stay within their budget limitations,” says RE/MAX.

A home that meets future needs

RE/MAX says that although it is impossible to know what the next ten years may hold, the reality is that many home buyers will be in their home for longer than they think. It will pay off to purchase a home that doesn’t just meet the criteria now, but also in the next five to ten years.

“Property is a long term investment. A must-have now may not be one in a few years, so home buyers should look at property and ask if they can see themselves staying there for a while and what the future looks like. Is marriage on the cards or perhaps children?  If so, then an extra bedroom would probably be of higher importance than granite counter tops.

A prime location

It might be an old cliché but there is certainly a lot of truth to the location, location, location adage. This mantra rings true for home buyers in any market; location will always be high on the must-have list. Whether it is a question of lifestyle or good return on investment, buying a property in the right location will be one of the most important decisions a buyer can make.

RE/MAX notes that vital aspects to consider when deciding on a location would be:

Proximity to your place of work.

• A location convenient to local amenities such as medical facilities and shopping centers.
• A neighborhood / estate or complex that is well-maintained and is aesthetically pleasing.
• Buyers with children or plans for a family should look at the quality of schools in the area.

“Try to find an area that is established and has a history of solid returns that have been stable over the long term. Look for areas that have kerb appeal that are well maintained and where there are more owners than tenants, as owners will predominately want to protect their investment by keeping the area well looked after.

A house that has been properly maintained

Buying a house that has been properly maintained by the previous owner can help alleviate a large number of costs in the future. He says, “With the introduction of the Consumer Protection Act many buyers are insisting on the list of defects that the act prescribes, even though legally it may not be applicable. It is important for them to know that they are purchasing a property that is in good repair.”

While a quick run through and spot check of the home can help buyers sift through their options and narrow down the property they would most like to purchase, it is best to have a professional inspector undertake a thorough check and advise accordingly.

Contemporary updates in key areas

Although the property may not be completely renovated, there are certain areas of a home that buyers place a higher priority on, says Goslett. This is because there are some rooms in a home where renovations will add more value in terms of resale at a later stage.

For example, kitchens and bathrooms are known to get sellers the best boost in value, with many sellers recouping as much as 80% of their renovation costs on a kitchen and between 65% and 75% of the costs of remodeling a full bathroom. “These two areas of a home are the most important to buyers when looking at prospective houses. If they have been renovated or simply updated by the previous owner, it will have a big impact on the overall appeal of the home.

Goslett concludes by saying that given the fast options available to buyers in the current market, sellers should take these must-haves into consideration when wanting to successfully sell their property in the shortest possible time.

Please contact us if you require any further information or would like to apply for finance:

Complete this short form online

011.327.4489 / 0861 1111 93

morne@mortgagepluscc.co.za

www.mortgagepluscc.co.za