The year is ending for property investors, sellers and service providers better than it started. After a gloomy period of sliding house prices amid slow sales volumes, residential real estate has started perking up and South Africa looks quite good in the global charts. It ranks number 15 among 18 countries registering positive returns year-on-year, according to the latest Knight Frank Global House Price Index.

Absa’s residential real estate expert Jacques du Toit issued a report, also this week, that South African house prices improved not far off 5%, comparing November 2009 to same time last year. The average South African house now costs R1m.

A marked improvement in performance late this year means that when the average South African looks back at 2009, their home will have declined in value by roughly ½%, according to Absa’s calculations. That’s a relatively modest fall if you consider we have been in the throes of the worst global recession seen in decades.

In broadbrushstrokes the picture is looking rosier than it has for some time. Said Du Toit: “If recent trends in price levels prove to be sustainable, nominal price growth of at least 5% can be expected in 2010. Real house prices are forecast to decline for a second consecutive year in 2009, with at best a small real increase next year, based on nominal house price and consumer price inflation trends and projections.”

Can the good times continue?

Rising electricity rates are causing great concern. Some reckon the steep 35%-plus increase Eskom would like to implement will put the brakes on the economy just as South Africa is trying to pull away from recession.

FNB’s top property analyst John Loos noted that it isn’t only under-investment in electricity supply that has caught up with the nation.” Transport, water and sewage in some areas also require urgent attention, which would probably imply more costs coming the way of the household sector,” he observed.

There’s also danger riding in from the Middle East.  Until now, Dubai has been synonymous with “shop till you drop during your airport stop-over” for many South Africans. Its crashing real estate market, however, is threatening to cause massive financial ripples across the globe and at the very least discomfort in some quarters. Dubai’s government, through various entities, has tentacles in many countries and vice versa.

Even South African life assurer Old Mutual has skin on the game in Dubai. Bloomberg news service reported earlier this week that Old Mutual’s U.S. life unit has $83.6m in Dubai World-related bonds. It quoted ratings agency Moody’s as saying it does not believe the exposure is “meaningful”, however it highlighted the fact Old Mutual is one of the three “American” insurers with the most bonds sold by Dubai World, the holding company that’s in talks to renegotiate a staggering $26bn of debt.

Liam Bailey, head of residential research at Knight Frank suggests the whole Dubai World debacle is threatening the global pick-up in residential property prices. Bailey said, after the release of the latest Knight Frank Global House Price Index: “The recent debt issues with Dubai World and the subsequent loss of confidence by investors means even this nascent rally is already under threat.”

House prices are now rising in a clear majority of locations around the world with almost 70% of countries in the Knight Frank Global House Price Index reporting growth in the third quarter of 2009. There is even talk of another property bubble developing in some locations, like Singapore. Improvements come in many cases after large price declines.

“It is worth noting that house prices in almost 60% of the countries in the index are still lower than they were a year ago. That is not to say prices are on a guaranteed one-way trajectory – the global recovery from recession is unlikely to be trouble-free as the recent problems in Dubai have highlighted – but it does seem that any further falls are likely to be corrections rather than the start of another round of drastic reductions,” said Bailey.

In the main, it looks like it is a little early to get out the party hats and start celebrating. If you have been planning on selling, now might be a very good time to put your home on the market. At the very least the 2010 euphoria should help add some fuel to the market. If you’re buying, or holding, don’t hold your breath for rip-roaring returns any time soon.

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