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Where's our silver liningIt is said that every cloud has a silver lining, but is this true for South Africa’s current economic climate?
With the harsh trading conditions we have been experiencing recently, the property industry has been hit the hardest. According to Statistics SA, real estate growth slowed further, from 4.9% in the first quarter to 2.3% in the second quarter. Activity levels in the residential property market have been at record lows and went far beyond what was expected. However, not all is doom and gloom.
Deon Lessing, marketing director of Betterbond, says: “Sellers have found it difficult to sell in the current market, which has led to more realistic pricing. With the property price dropping, buyers are able to find property in their price range that previously may have been too expensive for them. Buyers and sellers are beginning to see eye to eye.”
The stable interest rates of the current quarter, coupled with further expected decline in the debt to disposable income ratio should see a steady improvement in the market and overall stakeholder confidence. This will improve at a steady pace with a positive impact on the household purchasing power from the middle of 2009. By then there will also be potential for interest rates to begin a decline. Consumers can already breathe a sigh of relief as fuel prices have come down, and with a more positive outlook on oil prices, will continue to do so.
Jeanne van Jaarsveldt, assistant regional director of RE/MAX of Southern Africa says: “On a national basis we have seen an increase in demand for property on our month on month figures. Although the total sales volumes are still lower than 2007, regional figures suggest that volumes have declined by 25%-35%, with demand in the Eastern Cape the least affected on a National Basis.
What is positive is that the past 3 months has seen a steady market recovery and has been the best we have seen on a national level during 2008. This is particular due to the stability of interest rates and consumer confidence showing signals of hope and a positive outlook.
Coastal areas are still sought after by investors and other areas such as Rustenburg and Middelburg are showing strong demand, particularly fuelled by continual strong housing demands by major mining firms. RE/MAX for see that by April 2009 we should see the market on its way to recovery, which will continue on a positive trend for the remainder of 2009”
“2010 is approaching and all its benefits are becoming increasingly visible. The economic cycle will turn for the better and a year from now when the dust has settled on the current process of political leadership change, the country will be able to reap the reward of the seeds we sow now,” adds Lessing.
Although there has been much debate over foreign buyers in South Africa, with 2010 in view and current realistic pricing we may see an increase in demand from overseas buyers. This could also have an impact on property pricing. Currently foreign buyers only make up approximately 3% of all buyers in the South African market. Many predict that growth in the market will begin to rear its head in early 2009.
“Activity is slowly returning to the market and we could see a turn around sooner than expected. Buyers are showing interest and money seems to be waiting to get back into the market. However, buyers will have to contend with stringent credit requirements laid down by banks as a result of a worldwide liquidity crunch, which will still curtail growth for a while longer ,” Lessing concludes. << Back to news section
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