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Johannesburg - The chairperson of Lew Geffen Sotheby’s International Realty, Lew Geffen, says if anyone is considering selling property, now is the time to do it.
He said there was always ebb and flow in the market and at the moment things lie in favour of sellers because of the severe shortage of sale stock around the country.
The effect this is having is encapsulated by the fact that house prices have increased by 12% year on year from June 2012 to June 2013 (according to Absa’s quarterly housing review) while the economy as a whole has only grown by 2.3% over the same period.
Geffen said: “2014 will be all about restoring balance to the market. Once the stock shortage choke-hold loosens, however, we will be back in a healthy cycle that barring any further economic calamities, should pave the way for greater sustainable growth.”
Growth speed up
Reviewing the past year, Geffen said the country’s residential property market started to return to a state of normality in 2013 for the first time since 2006/2007, with market forces driving prices in what has swung from a buyers’ market during the recession to what is unquestionably a sellers’ market this year.
“The property market has to be viewed as existing within the greater South African economy, which is in a slow growth phase following the recession that started in 2008. As this year has gone on, we’ve started to see that growth speed up somewhat and the property sector along with it.”
Reuters recently reported that an aggregate of growth predictions for 2014 suggested an average increase of 3.2%, similar to that of other developing economies.
This translates to a housing market that is showing some mobility, but cautiously so.
Conservative
“By way of example, in 2006 the industry as a whole was seeing around 40 000 transactions per month and we’re now down to less than 20 000, though this number has started to increase.” says Geffen.
The delicate nature of this recovery is highlighted by South Africa’s banks, which are maintaining a much more conservative lending attitude in this post-recessionary environment. This has the beneficial effect of tempering property price increases which, if left unchecked, can become unsustainable.
“With bond applications being swiftly rejected for any homes that are deemed to be overvalued, greedy sellers are finding very difficult to sell overvalued properties” says Geffen.
“This is an increasingly important mechanism that prevents prices from spinning out of control, potentially leading to another bubble.”
Sticky situation
Geffen sounded a warning: “ I would warn buyers that they need to be wary of buying financed properties at the upper limit of what they can afford.”
A repo-rate hike is very likely over the course of 2014, given that it has remained at a record-low of 5% for the past 14 months.
“This means that buyers who accept bonds they can just afford are going to find themselves in a sticky situation once the rate increases” says Geffen.
From a development perspective, a weak rand, which Absa expects to weaken further during 2014, should continue to encourage foreign investment.
He said there was always ebb and flow in the market and at the moment things lie in favour of sellers because of the severe shortage of sale stock around the country.
The effect this is having is encapsulated by the fact that house prices have increased by 12% year on year from June 2012 to June 2013 (according to Absa’s quarterly housing review) while the economy as a whole has only grown by 2.3% over the same period.
Geffen said: “2014 will be all about restoring balance to the market. Once the stock shortage choke-hold loosens, however, we will be back in a healthy cycle that barring any further economic calamities, should pave the way for greater sustainable growth.”
Growth speed up
Reviewing the past year, Geffen said the country’s residential property market started to return to a state of normality in 2013 for the first time since 2006/2007, with market forces driving prices in what has swung from a buyers’ market during the recession to what is unquestionably a sellers’ market this year.
“The property market has to be viewed as existing within the greater South African economy, which is in a slow growth phase following the recession that started in 2008. As this year has gone on, we’ve started to see that growth speed up somewhat and the property sector along with it.”
Reuters recently reported that an aggregate of growth predictions for 2014 suggested an average increase of 3.2%, similar to that of other developing economies.
This translates to a housing market that is showing some mobility, but cautiously so.
Conservative
“By way of example, in 2006 the industry as a whole was seeing around 40 000 transactions per month and we’re now down to less than 20 000, though this number has started to increase.” says Geffen.
The delicate nature of this recovery is highlighted by South Africa’s banks, which are maintaining a much more conservative lending attitude in this post-recessionary environment. This has the beneficial effect of tempering property price increases which, if left unchecked, can become unsustainable.
“With bond applications being swiftly rejected for any homes that are deemed to be overvalued, greedy sellers are finding very difficult to sell overvalued properties” says Geffen.
“This is an increasingly important mechanism that prevents prices from spinning out of control, potentially leading to another bubble.”
Sticky situation
Geffen sounded a warning: “ I would warn buyers that they need to be wary of buying financed properties at the upper limit of what they can afford.”
A repo-rate hike is very likely over the course of 2014, given that it has remained at a record-low of 5% for the past 14 months.
“This means that buyers who accept bonds they can just afford are going to find themselves in a sticky situation once the rate increases” says Geffen.
From a development perspective, a weak rand, which Absa expects to weaken further during 2014, should continue to encourage foreign investment.
