Johannesburg - Property agents who have managed to hold on since the downturn are currently experiencing market conditions that industry experts reckon are the worst in 30 years.
Agents are now operating in a market characterised by a dearth of mortgage finance and an unwillingness on the part of banks to lend, low transaction volumes and houses remaining in the market for long periods.
While it is true that property markets are cyclical, even the most experienced commentators and experts were caught on the wrong foot by the severity of the downturn in the property market three years ago after a couple of years of exceptional growth, said Dr
Andrew Golding, chief executive of
Pam Golding Properties (PGP).
He said that in the downturn sales volumes had halved almost overnight and the South African housing market has since managed only a marginal improvement.
Jan le Roux, founder and chairperson of property group Leapfrog, said sales volumes remain more than 40% below 2007/’08 levels.
Add to this a profusion of new legislation and the industry becomes highly complex, said Jawitz Properties chief executive Herschel Jawitz.
He said companies that had failed to see the shift in the market over the past six months, and who did not have a realistic outlook for the market over the next 12 months, would come under severe pressure.
In the past few years the industry has lost more than 40 000 agents. From a peak of about 76 000 registered property agents in the 2007 boom 34 183 remain, as evident from Estate Agency Affairs Board figures.
Jawitz said that, even though the figures had reduced so dramatically, volumes remained low, resulting in aggressive competition for deals and mandates.
First National Bank’s latest property barometer shows that in the second quarter of this year a house remained on the market for an average of 15 weeks and one day.
This is a long time compared with less than two months in the heydays of 2005/06. It shows that sellers still expect unrealistic prices, or that market supply far exceeds demand.
A second indicator of unrealistic prices and an oversupply is the fact that 87% of all sellers have to drop their prices to get their houses sold.
In the second quarter prices asked had to be reduced by 11%.
Golding said that as far as trading conditions are concerned, the market is divided into two.
On the one hand there is the non-metropolitan secondary leisure market, which is characterised by a significant supply in the market and exceptionally low sales volumes owing to a lack of buyer appetite.
On the other hand there is the metropolitan primary market, which is more normal, but where sentiment is dampened by lacklustre prospects for capital growth.
Re/Max Southern Africa chief executive Adrian Goslett said the biggest obstacles to a recovery in the housing market were undoubtedly the lack of mortgage finance and banks’ reluctance to lend.
“Less than one of every two home loan applications is approved,” he said.