The residential property market in South Africa is still coming to terms with the fallout from the economic crisis, said Auction Alliance CEO Rael Levitt on Monday.
According to SA's largest auction group, sales trading activity is increasing as home buyers take advantage of a slower recovery.
"South Africans are now seeing a repeat of the lengthy property downturn last experienced in the early 1990's. Opportunistic buyers are finding great deals which is boosting trading volume.
"What is unique about this property contraction is that low values are coinciding with low interest rates. It's thus bargain hunting season for those with access to funding," says Levitt.
According to Levitt, the outlook for the second half of 2010 is flat.
The world cup has been a great shot in the arm for local tourism and retail trading but a full property recovery is still 12-18 months off, even in a reasonable interest rate environment and even with reasonable market stability, says Levitt.
"Those who were expecting the South African real estate market to quickly recover in the second half of 2010, after the world cup, may be in for a long wait."
Alliance is predicting a flat real estate market with no increase in value through December 2010.
This is echoed by Absa senior property analyst, Jacques Du Toit, who says that year-on-year growth in house prices may peak soon.
Du Toit says house prices rose by 14,8% year-on-year last month and that Absa was forecasting slower growth at 8% to 9% until the end of this year.
Levitt concurs with this view and believes that from the beginning of next year prices are projected to increase at a stronger rate.
"Depending on global macro-economic trends we could end up running through a strong cycle only next year," warns Levitt, adding that a property contraction can last for several years and house values could move up more strongly or more weakly, depending on any number of circumstances."
"Certain sectors in the residential property market, such as leisure property, new property developments and vacant land sales may weaken over the next six months as a delayed pipeline of distressed properties begins to liquidate," says Levitt.
"Signs of stabilisation and growth in over supplied sectors cannot be hailed as part of a recovery and may soon recede as an overhang of the shadow inventory of distressed properties waits to enter the market."
The general outlook that the housing market has finally bottomed may well be "premature" optimism.
The single largest impediment to a recovery in the housing market is the large number of loans that are either in a delinquent status or are destined to liquidate.
"We have seen a slowdown in the number of distressed properties hitting the market, but this doesn't mean that the banks have not been developing a pipeline of future delinquencies due to clients who were assisted with short term bond relief.
"One must remember that many banks have assisted their debtors reschedule debt, but if property price inflation levels off for the next 6 months, these debtors will have to start normalising their loans," Levitt added.
"The distressed backlog is due to a longer timeline for loan foreclosures in South Africa", explains Levitt.
"In other words, loans continue to transition into the delinquency pipeline at a rapid pace, but are moving out at a very slow pace."
He said that many distressed loans are "destined to liquidate" and will impact on the recovery but at the same time allow cash-flush buyers the ability to go bargain hunting over the next few months.
"We are concerned that, in light of this housing overhang, the stabilisation we have seen in home prices the last few months is temporary," says Levitt.
"That said, there is a window of opportunity for investors to get into a cheap market that will recover in the medium and long term."
Source: I-Net Bridge
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Showing posts with label 2010 soccer world cup. Show all posts
Showing posts with label 2010 soccer world cup. Show all posts
Friday, 16 July 2010
Monday, 28 June 2010
What sporting events mean for Property in South Africa
28 Jun 2010
Global sporting events tend to not only significantly raise the status of the game, but also property prices in the host city and bring with them a cornucopia of associated benefits.
This is according to Ya’el Geffen, executive director of Sotheby’s International Realty South Africa, who adds that “past international sporting events have proved that being a host city brings investment in public infrastructure, urban regeneration, a significant social impact and an increase in property values”.
“On average, the previous Olympic host cities of Athens, Sydney, Atlanta and Barcelona all outperformed their national markets, with 19% higher property prices in the five years leading up to the games.
“Similarly, before and after the 2002 World Cup in South Korea, property prices increased by as much as 55% over a one-year period before and after the tournament, with properties near the stadiums rocketing by more than 100% in value.”
Geffen says that the 2010 FIFA World Cup has and is going to have a dramatic impact on the country.
“It is estimated that over 370,000 tourists will visit South Africa for the World Cup. They will stay an average 18 days and each is expected to spend around R30k (US$4,500), therefore injecting much-needed money into the economy. Thanks to the World Cup, over R40bn (UD$5,45bn) has been spent on upgrading the country's infrastructure, including roads, airports and public transport as well as the stadiums.
“The long-term benefits include the increase of tourism and the creation of thousands of new jobs. This will, in due course, translate into thousands of new homebuyers and owners.
“From a property perspective we are very excited,” says Geffen.
Charles Smith of Sotheby’s International Realty in London, host city of the 2012 Summer Olympic Games, recognises that it is not just the immediate rise in property prices that will have a positive impact on the United Kingdom capital – the legacy of the Olympic zone is also crucial.
“Global sporting events can be the catalyst to make major infrastructure projects happen, improving transport connections and leisure facilities, benefitting the city in the long-term long after the games are over,” says Smith.
The announcement that Rio de Janeiro will host both the World Cup in 2014 and the Olympics in 2016 already is having positive consequences.
“Investment in real estate has been rising in Brazil since 2008 and there have been significant increases in land speculation, which have increased residential property prices by 10% to 20%.
“The Abadi (Brazilian Association of Real Estate Management) has reported a greater impact on rising real estate values in areas where the Olympics will be taking place, such as Barra da Tijuca,” says Guilherme F.Caldeira of Brazil Sotheby’s International Realty.
Vancouver also has reported many favourable benefits due to the global exposure of hosting the 2010 Winter Olympics earlier this year.
“The spotlight on Vancouver has educated people about Canada’s sophisticated economy,” says Anna-Maria Retsinas of Sotheby’s International Realty Canada in Vancouver.
“There has been significant foreign investment in and around Vancouver and British Columbia from Europe and Asia as a direct result. In turn, we are experiencing an increasing number of inquiries for our local properties.”
Meanwhile, Grinrod Bank's chief investment officer, Ian Anderson, said the World Cup has “helped South Africa weather the worst recession in 80 years’’.
“Unfortunately, the real estate markets were at the heart of the recession and as such have a fairly bad reputation at the moment.
Anderson noted that on an international basis banks were very generous in their lending and had lent to people that probably shouldn’t have obtained loans in the first place. “The result was that when things got tough, a substantial number of foreclosures took place in the US, Europe and the UK.”
He said that in South Africa banks had been faced with a completely different set of circumstances. “We are not in the same predicament as the rest of the world.”
According to Anderson South African banks had been a lot more circumspect in their lending practices. This was mainly due to restrictions imposed by the IMF and the World Bank. “Our banks performed well from 2003 to 2008.”
He said in the last four years the South African construction industry has been focusing virtually exclusively on delivery for the World Cup, said Anderson, who believes that while there were developers who were itching to develop, they found that there simply wasn’t a construction company available to build anything of any great significance.
In addition, he said that construction costs rose significantly and while he wasn’t sure of the exact figure, he believed these were around the 40% per annum mark, putting a further damper on any development actively. As a result of this, there was a strong balance between supply and demand, particularly in the commercial sector.
There hasn’t been a significant decline in property prices and in his opinion, the South African property market was extremely well positioned at the moment, with interest rates expected to remain stable and no pressure on rentals. “Although there are certain problems in the commercial sector, this is the exception rather that the rule.”
The one area where there is significant over-capacity is hotels. He noted that a recent report predicted that 20% of South African hotels will fail within the next 18 months. The One and Only hotel in Cape Town will at no point during the World Cup be more than 40% occupied, and in fact will only have a 20% occupancy rate during most of the tournament.
It is not just the high-end hotels that will be affected, he said. “While the property market has remained balanced, hotels were the one area that hadn’t.”
FNB Commercial Property Economist John Loos has said that while an influx of foreign tourists would up the interest in the residential property market it was unlikely to be sufficient enough to make a meaningful difference to the overall market.
"One could expect some increase in foreign visitor viewing, and possibly demand too, in some of the luxury areas of Cape Town and the southern Cape for instance.
"However, I remain of the view that this number won't be big enough to make a meaningful difference to the overall residential market of the country," Loos said.
Loos painted an optimistic longer-term picture. "I am very positive about the long-term benefits of the World Cup, along with all the other international events hosted before it, in terms of gradually changing the perceptions of the country and its organisational capacity for the better.
"And insofar as it achieves this, long-term economic growth can benefit from higher interest from investors. Anything that's good for the economy is good for property," he said.
The economist said he remained of the belief that short-term direct impacts in terms of World Cup visitor residential demand would be small in the grander scheme of things.
However, agents and principals report that World Cup visitors as well as locals are indeed taking time out to view properties and enquiries for leisure properties are increasing.
Ling Dobson, Pam Golding Properties’ (PGP) area principal in Knysna, says there’s been a surge in attendance at show days over the past two weekends.
“We have had enquiries from French and Italian visitors who are here for the World Cup, who are mainly interested in properties with sea views in the R3-R5m price range, for use as leisure homes when visiting South Africa on holiday. We are also in contact with an Italian who is travelling to Knysna in two weeks’ time to view properties with a view to purchase. Even just prior to the World Cup we sold a property in Knysna to French buyers from Brenton-on-Sea.”
“However, what is interesting is that suddenly the positive sentiment generally seems to have sparked a dramatic increase in enquiries from South African home buyers from Johannesburg, Durban and Cape Town, as well as local buyers in this area. While this demand is mainly for homes, there are also enquiries for commercial properties, which is a very positive indicator,” she says.
In KwaZulu-Natal, PGP’s Umhlanga office reports strong interest from a number of German investors who are seeking leisure homes in the R5m price range, located close to the beach and with sea views. “This is a group of friends who are all interested in property here. They are very impressed with Umhlanga. In addition, we are assisting a Brazilian buyer, who says this is a fantastic place to buy property, who is looking in the price range up to R1,7m. Another visitor, a young, male UK buyer, is looking for an apartment close to the beach and in the R2m price bracket,” says Elwyn Schenk, PGP’s area principal.
PGP area principal for Rustenburg, Ian Straarup, says overseas buyers are mainly interested in properties in a tranquil, scenic environment, particularly those which have a strong African flavour, for example game farms and smallholdings. “They are looking for value for money and probably properties ranging in size from 15ha, and not necessarily in residential areas.”
Meanwhile from Germany, Gaby Moessner, PGP’s manager based in the Munich area, reports that World Cup Soccer fever is running high with considerable interest being shown in South Africa. “All over Europe and especially in Germany there is huge media exposure for South Africa.
“During 2009 and prior to this event 50% of my clients were those interested in buying a property in South Africa with a view to the World Cup, for example a guesthouse or B&B. These buyers were mainly from Germany, Austria and Switzerland, with the main focus on the Western Cape and Somerset West in particular, with the second highest interest shown in Mpumalanga in areas such as White River and Hoedspruit, with proximity to Kruger Park and value for money of key importance.”
In terms of residential property, Moessner says currently enquiries are mainly for houses and apartments initially for holiday and later for retirement use, in the price range from R2-R3,5m and situated along the Garden Route, Eastern Cape and south coast of KwaZulu-Natal.
“However, these are clients who have already visited South Africa or who are planning a trip after the World Cup. I definitely see good prospects for property sales following this event as many of our buyers first research the market, and may then consider looking at homes for leisure or retirement at competitive prices,” she says.
Eugene Brink and I-Net Bridge
Global sporting events tend to not only significantly raise the status of the game, but also property prices in the host city and bring with them a cornucopia of associated benefits.
This is according to Ya’el Geffen, executive director of Sotheby’s International Realty South Africa, who adds that “past international sporting events have proved that being a host city brings investment in public infrastructure, urban regeneration, a significant social impact and an increase in property values”.
“On average, the previous Olympic host cities of Athens, Sydney, Atlanta and Barcelona all outperformed their national markets, with 19% higher property prices in the five years leading up to the games.
“Similarly, before and after the 2002 World Cup in South Korea, property prices increased by as much as 55% over a one-year period before and after the tournament, with properties near the stadiums rocketing by more than 100% in value.”
Geffen says that the 2010 FIFA World Cup has and is going to have a dramatic impact on the country.
“It is estimated that over 370,000 tourists will visit South Africa for the World Cup. They will stay an average 18 days and each is expected to spend around R30k (US$4,500), therefore injecting much-needed money into the economy. Thanks to the World Cup, over R40bn (UD$5,45bn) has been spent on upgrading the country's infrastructure, including roads, airports and public transport as well as the stadiums.
“The long-term benefits include the increase of tourism and the creation of thousands of new jobs. This will, in due course, translate into thousands of new homebuyers and owners.
“From a property perspective we are very excited,” says Geffen.
Charles Smith of Sotheby’s International Realty in London, host city of the 2012 Summer Olympic Games, recognises that it is not just the immediate rise in property prices that will have a positive impact on the United Kingdom capital – the legacy of the Olympic zone is also crucial.
“Global sporting events can be the catalyst to make major infrastructure projects happen, improving transport connections and leisure facilities, benefitting the city in the long-term long after the games are over,” says Smith.
The announcement that Rio de Janeiro will host both the World Cup in 2014 and the Olympics in 2016 already is having positive consequences.
“Investment in real estate has been rising in Brazil since 2008 and there have been significant increases in land speculation, which have increased residential property prices by 10% to 20%.
“The Abadi (Brazilian Association of Real Estate Management) has reported a greater impact on rising real estate values in areas where the Olympics will be taking place, such as Barra da Tijuca,” says Guilherme F.Caldeira of Brazil Sotheby’s International Realty.
Vancouver also has reported many favourable benefits due to the global exposure of hosting the 2010 Winter Olympics earlier this year.
“The spotlight on Vancouver has educated people about Canada’s sophisticated economy,” says Anna-Maria Retsinas of Sotheby’s International Realty Canada in Vancouver.
“There has been significant foreign investment in and around Vancouver and British Columbia from Europe and Asia as a direct result. In turn, we are experiencing an increasing number of inquiries for our local properties.”
Meanwhile, Grinrod Bank's chief investment officer, Ian Anderson, said the World Cup has “helped South Africa weather the worst recession in 80 years’’.
“Unfortunately, the real estate markets were at the heart of the recession and as such have a fairly bad reputation at the moment.
Anderson noted that on an international basis banks were very generous in their lending and had lent to people that probably shouldn’t have obtained loans in the first place. “The result was that when things got tough, a substantial number of foreclosures took place in the US, Europe and the UK.”
He said that in South Africa banks had been faced with a completely different set of circumstances. “We are not in the same predicament as the rest of the world.”
According to Anderson South African banks had been a lot more circumspect in their lending practices. This was mainly due to restrictions imposed by the IMF and the World Bank. “Our banks performed well from 2003 to 2008.”
He said in the last four years the South African construction industry has been focusing virtually exclusively on delivery for the World Cup, said Anderson, who believes that while there were developers who were itching to develop, they found that there simply wasn’t a construction company available to build anything of any great significance.
In addition, he said that construction costs rose significantly and while he wasn’t sure of the exact figure, he believed these were around the 40% per annum mark, putting a further damper on any development actively. As a result of this, there was a strong balance between supply and demand, particularly in the commercial sector.
There hasn’t been a significant decline in property prices and in his opinion, the South African property market was extremely well positioned at the moment, with interest rates expected to remain stable and no pressure on rentals. “Although there are certain problems in the commercial sector, this is the exception rather that the rule.”
The one area where there is significant over-capacity is hotels. He noted that a recent report predicted that 20% of South African hotels will fail within the next 18 months. The One and Only hotel in Cape Town will at no point during the World Cup be more than 40% occupied, and in fact will only have a 20% occupancy rate during most of the tournament.
It is not just the high-end hotels that will be affected, he said. “While the property market has remained balanced, hotels were the one area that hadn’t.”
FNB Commercial Property Economist John Loos has said that while an influx of foreign tourists would up the interest in the residential property market it was unlikely to be sufficient enough to make a meaningful difference to the overall market.
"One could expect some increase in foreign visitor viewing, and possibly demand too, in some of the luxury areas of Cape Town and the southern Cape for instance.
"However, I remain of the view that this number won't be big enough to make a meaningful difference to the overall residential market of the country," Loos said.
Loos painted an optimistic longer-term picture. "I am very positive about the long-term benefits of the World Cup, along with all the other international events hosted before it, in terms of gradually changing the perceptions of the country and its organisational capacity for the better.
"And insofar as it achieves this, long-term economic growth can benefit from higher interest from investors. Anything that's good for the economy is good for property," he said.
The economist said he remained of the belief that short-term direct impacts in terms of World Cup visitor residential demand would be small in the grander scheme of things.
However, agents and principals report that World Cup visitors as well as locals are indeed taking time out to view properties and enquiries for leisure properties are increasing.
Ling Dobson, Pam Golding Properties’ (PGP) area principal in Knysna, says there’s been a surge in attendance at show days over the past two weekends.
“We have had enquiries from French and Italian visitors who are here for the World Cup, who are mainly interested in properties with sea views in the R3-R5m price range, for use as leisure homes when visiting South Africa on holiday. We are also in contact with an Italian who is travelling to Knysna in two weeks’ time to view properties with a view to purchase. Even just prior to the World Cup we sold a property in Knysna to French buyers from Brenton-on-Sea.”
“However, what is interesting is that suddenly the positive sentiment generally seems to have sparked a dramatic increase in enquiries from South African home buyers from Johannesburg, Durban and Cape Town, as well as local buyers in this area. While this demand is mainly for homes, there are also enquiries for commercial properties, which is a very positive indicator,” she says.
In KwaZulu-Natal, PGP’s Umhlanga office reports strong interest from a number of German investors who are seeking leisure homes in the R5m price range, located close to the beach and with sea views. “This is a group of friends who are all interested in property here. They are very impressed with Umhlanga. In addition, we are assisting a Brazilian buyer, who says this is a fantastic place to buy property, who is looking in the price range up to R1,7m. Another visitor, a young, male UK buyer, is looking for an apartment close to the beach and in the R2m price bracket,” says Elwyn Schenk, PGP’s area principal.
PGP area principal for Rustenburg, Ian Straarup, says overseas buyers are mainly interested in properties in a tranquil, scenic environment, particularly those which have a strong African flavour, for example game farms and smallholdings. “They are looking for value for money and probably properties ranging in size from 15ha, and not necessarily in residential areas.”
Meanwhile from Germany, Gaby Moessner, PGP’s manager based in the Munich area, reports that World Cup Soccer fever is running high with considerable interest being shown in South Africa. “All over Europe and especially in Germany there is huge media exposure for South Africa.
“During 2009 and prior to this event 50% of my clients were those interested in buying a property in South Africa with a view to the World Cup, for example a guesthouse or B&B. These buyers were mainly from Germany, Austria and Switzerland, with the main focus on the Western Cape and Somerset West in particular, with the second highest interest shown in Mpumalanga in areas such as White River and Hoedspruit, with proximity to Kruger Park and value for money of key importance.”
In terms of residential property, Moessner says currently enquiries are mainly for houses and apartments initially for holiday and later for retirement use, in the price range from R2-R3,5m and situated along the Garden Route, Eastern Cape and south coast of KwaZulu-Natal.
“However, these are clients who have already visited South Africa or who are planning a trip after the World Cup. I definitely see good prospects for property sales following this event as many of our buyers first research the market, and may then consider looking at homes for leisure or retirement at competitive prices,” she says.
Eugene Brink and I-Net Bridge
Friday, 29 January 2010
No stimulus for property market
The property market will have to get by without the stimulus of a series of rate cuts, as it is unlikely to enjoy much interest rate relief during 2010.
The property market will have to get by without the stimulus of a series of rate cuts, as it is unlikely to enjoy much interest rate relief during the course of 2010.
This is the word from Brian Falconer, CEO of Colliers Residential in response to the SA Reserve Bank Monetary Policy Committee's decision to leave the repo rate unchanged. It has now remained unchanged since August last year, at 7%.
This leaves the prime rate at 10,5%, which is still too high to stimulate the property market, says Falconer.
"We can understand the Reserve Bank's reluctance to afford debt-strapped consumers a further 50 basis point cut, but it is disappointing that our interest rates remain so high," says Falconer.
"While there are a few signs of recovery in the property market, notably in upward house prices, other indicators remain negative.
"For instance, the total value of building plans passed by larger municipalities decreased by 23,1%, or R17,4 billion, in the first 11 months of 2009, as reported by Statistics South Africa.
"This is a true leading indicator, and it tells us that consumer and investor confidence in the property market remains low.
"Of particular concern to us is the fact that the largest decrease in approved business plans was for residential buildings, which fell by 38%, or R13.9 billion. This is a clear indication that the market will remain sluggish during 2010 without the external stimulus a rate cut would have provided."
While Falconer has understanding for the Reserve Bank's decision, he points out that there was significant favourable data to have led to a different decision:
At 5.8%, inflation is under control. Specifically, food inflation did not spiral out of control over the Christmas season.
Festive season retail figures were down at their lowest level for a decade, according to preliminary sales data.
While some commentators have viewed this as a consequence of job losses caused by the recession, another view is that people are concerned about incurring additional debt - credit extension was down 1,59% year on year in November 2009.
This would mean that the Reserve Bank's policies regarding credit have succeeded in their intent.
Despite the record cold snap in the northern hemisphere, oil prices have remained lower than expected, keeping a lid on inflation.
Against this, though, are the looming Eskom price increases and anticipated inflationary inputs from the Soccer World Cup.
"On balance, the Reserve Bank may have made a decision that is in the country's broader interests, but from a property perspective, we would hope for a little more latitude next time around," says Falconer.
"The property market needs positive stimulation, and we hope it will come around later this year. But for now, we have to get by with what we have".
Source: I-Net Bridge
The property market will have to get by without the stimulus of a series of rate cuts, as it is unlikely to enjoy much interest rate relief during the course of 2010.
This is the word from Brian Falconer, CEO of Colliers Residential in response to the SA Reserve Bank Monetary Policy Committee's decision to leave the repo rate unchanged. It has now remained unchanged since August last year, at 7%.
This leaves the prime rate at 10,5%, which is still too high to stimulate the property market, says Falconer.
"We can understand the Reserve Bank's reluctance to afford debt-strapped consumers a further 50 basis point cut, but it is disappointing that our interest rates remain so high," says Falconer.
"While there are a few signs of recovery in the property market, notably in upward house prices, other indicators remain negative.
"For instance, the total value of building plans passed by larger municipalities decreased by 23,1%, or R17,4 billion, in the first 11 months of 2009, as reported by Statistics South Africa.
"This is a true leading indicator, and it tells us that consumer and investor confidence in the property market remains low.
"Of particular concern to us is the fact that the largest decrease in approved business plans was for residential buildings, which fell by 38%, or R13.9 billion. This is a clear indication that the market will remain sluggish during 2010 without the external stimulus a rate cut would have provided."
While Falconer has understanding for the Reserve Bank's decision, he points out that there was significant favourable data to have led to a different decision:
At 5.8%, inflation is under control. Specifically, food inflation did not spiral out of control over the Christmas season.
Festive season retail figures were down at their lowest level for a decade, according to preliminary sales data.
While some commentators have viewed this as a consequence of job losses caused by the recession, another view is that people are concerned about incurring additional debt - credit extension was down 1,59% year on year in November 2009.
This would mean that the Reserve Bank's policies regarding credit have succeeded in their intent.
Despite the record cold snap in the northern hemisphere, oil prices have remained lower than expected, keeping a lid on inflation.
Against this, though, are the looming Eskom price increases and anticipated inflationary inputs from the Soccer World Cup.
"On balance, the Reserve Bank may have made a decision that is in the country's broader interests, but from a property perspective, we would hope for a little more latitude next time around," says Falconer.
"The property market needs positive stimulation, and we hope it will come around later this year. But for now, we have to get by with what we have".
Source: I-Net Bridge
Saturday, 3 October 2009
2010 Soccer World Cup Rentals - Johannesburg
Current rental accommodation available in Johannesburg for the 2010 Football World Cup.
For more information, please click on links below:
If you require any further info or if the properties above don't match your criteria, please drop me an e-mail at info@horizon-consultancy.com
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