The property markets across the board are still in hibernation mode, according to the latest Rode’s Report on the State of the Property Market.
The lagged impact of the business cycle on the property market is especially evident in the offices segment. For instance, it is only the Durban decentralized areas that could attain any growth on a year ago (a nominal +5%) that exceeds the expected growth rate in building–cost inflation (at +2,6%).
For Cape Town, Johannesburg and Pretoria, growth was, on average, below that of building-cost inflation, and real rentals are currently lower than they were a year ago.Says Erwin Rode of property economists Rode & Associates: “Even in the industrial property market, where manufacturing activity and retail sales are said to be in recovery mode, the overall strength and stability of this recovery remains an uncertainty, particularly against the backdrop of both a South African economy that continues to shed jobs and a still-wobbly world economy.”Such uncertainty in the industrial property market also extends to prospects for market rentals, with these rentals continuing to contract across the country (specifically in the Central Witwatersrand, Durban, Port Elizabeth and the Cape Peninsula).Likewise, flat rentals in Durban and Cape Town could only achieve a nominal 1% growth in the first quarter, while Johannesburg and Pretoria rentals were at the same level of a year ago.
However, notes Rode, an interesting (and “premature”) phenomenon over the past few months has been the recovery in the growth of nominal house prices. “After reaching its lowest point in the first half of 2009, yearly growth has accelerated to almost 14% in April, up from 12% in March, possibly due to easing credit standards,” says Rode. But, he warns, “Once the base effects have played themselves out, one can again expect house prices – especially in the lower-priced segments – to show more moderate growth rates.
The reasons are household coffers that are still under pressure, job insecurity and house prices themselves that continue to remain high in real terms.”Capitalization rates have remained at roughly the same levels at which they were at the end of last year. “The adjective that best describes this situation,” notes Rode, “is ‘stable’”.
Capitalization rates are the property equivalent of the forward earnings yield of shares.“Nevertheless, considering that market rentals of offices, industrials and malls are shrinking in real terms, this situation could eventually lead to investors requiring higher minimum income returns to invest in property, and this would tend to depress market values.”However, because of low loan-to-value (LTV) ratios traditionally enforced by SA banks, landlords in South Africa are generally under little duress to sell.
“This explains the extraordinary stability of the premium property market”, says Rode.
We offer property investment opportunities throughout South Africa and Europe
Friday, 30 July 2010
Friday, 16 July 2010
Property recovery still '12 to 18 months off'
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
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
Friday, 9 July 2010
Strong foreign interest in SA property
Despite the precariousness of the world’s economy, there is still a lot of foreign interest in South African property, with investors from the United Kingdom, Germany, Australia and even the USA eyeing property here.
A recent analysis of traffic on the Lew Geffen Sotheby’s International Realty website shows that the number of international visits to the website is on the up.
The French seem to be the most interested in property in South Africa, with the number of French visitors to the site up by 62%. The number of website visits from people in Australia, Canada and the UK is also up by 52%, 32% and 23% respectively.
Visits by Germans have increased by 14% and American visitors have also increased by 10%.
Properties in the bracket of between R3m to R12m get the most hits from international visitors showing that it’s mainly up-market holiday homes that foreigners are after. There is also growing interest in smaller, lock-up-and-go properties in metropolitan areas suggesting that corporate travellers want a little place to call home when they are in the country on business rather than staying in a hotel.
“There has always been significant interest in SA property from Europeans, particularly people from the United Kingdom. Generally, they buy properties here for holiday purposes or as retirement homes.
“Interest is now more widespread, with people from all over the world looking into buying property here. Where it was once primarily luxury holiday homes in coastal regions that were being snapped up by foreigners, we are seeing an increase in the number of smaller properties in the metro areas of Johannesburg and Cape Town being sold to international investors,” says Jason Rohde, CEO of Lew Geffen Sotheby’s International Realty South Africa.
Rohde points out though that while foreign interest in SA property is growing, overseas buyers are more cautious about actually taking the plunge.
“While it is only the wealthy who are able to afford to buy homes overseas, they are not entirely untouched by economic factors so they aren’t as ready to jump into actually buying property as they perhaps were two years ago. The strengthening of the rand means that the foreigners’ purchasing power isn’t quite what it was either.
“As a result, foreign buyers are more price-sensitive and are looking for value for money. As with local investors, they are also weighing up their options more carefully, taking into account other factors such as security. The home has got to meet their criteria, including price, in order for them to make a commitment.
“Generally speaking, there is an oversupply of housing stock across most price categories, so it is essentially a buyers’ market. Sellers must be realistic about the asking price on their properties if they want to ensure a sale. They must present a fair deal,” Rohde advises.
Dr Andrew Golding, CE of the Pam Golding Property (PGP) group, says South Africa remains a sought-after property investment location among high net worth German investors.
“While the Soccer World Cup has focused increasing worldwide attention on South Africa, the fact is that even amid the global economic downturn South Africa has remained prominently on the radar of German property investors as a market to watch. Over the past year, Gaby Moëssner, who represents PGP in Germany, has seen increasing interest among German investors in leisure or holiday homes in South Africa.
“During this period their main areas of interest for such homes include the Eastern Cape with its exceptional value for money, the Garden Route, and the Cape and its popular Winelands region, particularly its scenic golf estates.
"As a rule and understandably, overseas buyers do not make quick decisions regarding property investment in overseas countries, including South Africa. And the Soccer World Cup – being a once-off event – may not necessarily influence their investment decision, although it certainly is considerably raising our country's profile abroad.
"Interestingly we've noted that several PGP clients in Germany have recently sold their properties in Spain and are looking to invest elsewhere. Certainly with our beautiful coastlines, spectacular natural scenery and appealing weather conditions during the harsh European winter months, South Africa can compete with other countries, such as Croatia and Turkey, which are currently of high interest among investors wishing to acquire holiday homes," adds Dr Golding.
Eugene Brink
A recent analysis of traffic on the Lew Geffen Sotheby’s International Realty website shows that the number of international visits to the website is on the up.
The French seem to be the most interested in property in South Africa, with the number of French visitors to the site up by 62%. The number of website visits from people in Australia, Canada and the UK is also up by 52%, 32% and 23% respectively.
Visits by Germans have increased by 14% and American visitors have also increased by 10%.
Properties in the bracket of between R3m to R12m get the most hits from international visitors showing that it’s mainly up-market holiday homes that foreigners are after. There is also growing interest in smaller, lock-up-and-go properties in metropolitan areas suggesting that corporate travellers want a little place to call home when they are in the country on business rather than staying in a hotel.
“There has always been significant interest in SA property from Europeans, particularly people from the United Kingdom. Generally, they buy properties here for holiday purposes or as retirement homes.
“Interest is now more widespread, with people from all over the world looking into buying property here. Where it was once primarily luxury holiday homes in coastal regions that were being snapped up by foreigners, we are seeing an increase in the number of smaller properties in the metro areas of Johannesburg and Cape Town being sold to international investors,” says Jason Rohde, CEO of Lew Geffen Sotheby’s International Realty South Africa.
Rohde points out though that while foreign interest in SA property is growing, overseas buyers are more cautious about actually taking the plunge.
“While it is only the wealthy who are able to afford to buy homes overseas, they are not entirely untouched by economic factors so they aren’t as ready to jump into actually buying property as they perhaps were two years ago. The strengthening of the rand means that the foreigners’ purchasing power isn’t quite what it was either.
“As a result, foreign buyers are more price-sensitive and are looking for value for money. As with local investors, they are also weighing up their options more carefully, taking into account other factors such as security. The home has got to meet their criteria, including price, in order for them to make a commitment.
“Generally speaking, there is an oversupply of housing stock across most price categories, so it is essentially a buyers’ market. Sellers must be realistic about the asking price on their properties if they want to ensure a sale. They must present a fair deal,” Rohde advises.
Dr Andrew Golding, CE of the Pam Golding Property (PGP) group, says South Africa remains a sought-after property investment location among high net worth German investors.
“While the Soccer World Cup has focused increasing worldwide attention on South Africa, the fact is that even amid the global economic downturn South Africa has remained prominently on the radar of German property investors as a market to watch. Over the past year, Gaby Moëssner, who represents PGP in Germany, has seen increasing interest among German investors in leisure or holiday homes in South Africa.
“During this period their main areas of interest for such homes include the Eastern Cape with its exceptional value for money, the Garden Route, and the Cape and its popular Winelands region, particularly its scenic golf estates.
"As a rule and understandably, overseas buyers do not make quick decisions regarding property investment in overseas countries, including South Africa. And the Soccer World Cup – being a once-off event – may not necessarily influence their investment decision, although it certainly is considerably raising our country's profile abroad.
"Interestingly we've noted that several PGP clients in Germany have recently sold their properties in Spain and are looking to invest elsewhere. Certainly with our beautiful coastlines, spectacular natural scenery and appealing weather conditions during the harsh European winter months, South Africa can compete with other countries, such as Croatia and Turkey, which are currently of high interest among investors wishing to acquire holiday homes," adds Dr Golding.
Eugene Brink
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, 4 June 2010
Threats to SA's Property Market
PRETORIA - Steep increases in municipal rates, electricity and service charges will be one of the factors to watch in the property market according to Absa's senior Property Analyst Jacques du Toit. This and possible increases in interest rates were two of the potential threats to the property market in the coming months.
Du Toit recently addressed the 2010 ARELLO District 6 meeting in Sandton about the prospects of the local housing market going forward and said it was unlikely that the property market was heading for a boom, despite the recent recovery in house prices. The Association of Real Estate Licence Law Officials (ARELLO) is an international organisation and South Africa forms part of ARELLO District 6, which consists of non-American countries.
In a post-conference interview with Realestateweb, Du Toit said he expected the recovery in the housing market to be gradual and dependent on the income position of households. "Debt levels are high. There have been job losses and large scale unemployment during the course of 2009. Also in the first quarter of 2010 the latest figures from Statistics SA show that there has been another round of job losses. This has an impact on the disposable income of households and while this situation persists the property market will remain under pressure."
Unlike some analysts Du Toit doesn't believe that we are headed for a double recessionary dip, but cautions that the situation in Europe may have a macroeconomic spill-over, which will impact on South Africa. "At this stage it doesn't look like this will have a major effect on South Africa, but as far as house price growth is concerned we are expecting somewhat slower year-on-year growth in the second half of 2010."
Du Toit notes that the leisure market has been slow to recover and that the coastal market has remained sluggish because of that. This however may present opportunities for investors who are looking for "good buys".
A hike in interest rates may also become a factor in the second half of 2011. "We feel that is when inflationary pressures will start to escalate, especially due to electricity and other service hikes and government may increase interest rates in an effort to curb inflation."
We asked how big an impact he expects electricity and municipal rate hikes to have on homeowners: "I believe this is going to play an increasing role in the choices prospective homebuyers make in the future. We'll be seeing major hikes in electricity and the resulting impact on the cost of running a household. There is also the issue of increasing rates, and buyers will take this into account when deciding on a property."
YDL Investment Property CEO Anton de Leeuw agrees with Du Toit's analysis. "From an investment perspective there has been a significant drop in the buy-to-let market. Investors are worried about returns and they are worried that prices may contract even further. What we've found with our client base is that there has been a significant shift to buying distressed properties, where properties are bought at substantial discount to market value. "
De Leeuw says despite the difficult market conditions their investors are still looking at average yields of about 10%, but agrees that profits in the property market are to be made in the long haul, as quick turnaround speculative profit opportunities are becoming harder to come by.
Du Toit recently addressed the 2010 ARELLO District 6 meeting in Sandton about the prospects of the local housing market going forward and said it was unlikely that the property market was heading for a boom, despite the recent recovery in house prices. The Association of Real Estate Licence Law Officials (ARELLO) is an international organisation and South Africa forms part of ARELLO District 6, which consists of non-American countries.
In a post-conference interview with Realestateweb, Du Toit said he expected the recovery in the housing market to be gradual and dependent on the income position of households. "Debt levels are high. There have been job losses and large scale unemployment during the course of 2009. Also in the first quarter of 2010 the latest figures from Statistics SA show that there has been another round of job losses. This has an impact on the disposable income of households and while this situation persists the property market will remain under pressure."
Unlike some analysts Du Toit doesn't believe that we are headed for a double recessionary dip, but cautions that the situation in Europe may have a macroeconomic spill-over, which will impact on South Africa. "At this stage it doesn't look like this will have a major effect on South Africa, but as far as house price growth is concerned we are expecting somewhat slower year-on-year growth in the second half of 2010."
Du Toit notes that the leisure market has been slow to recover and that the coastal market has remained sluggish because of that. This however may present opportunities for investors who are looking for "good buys".
A hike in interest rates may also become a factor in the second half of 2011. "We feel that is when inflationary pressures will start to escalate, especially due to electricity and other service hikes and government may increase interest rates in an effort to curb inflation."
We asked how big an impact he expects electricity and municipal rate hikes to have on homeowners: "I believe this is going to play an increasing role in the choices prospective homebuyers make in the future. We'll be seeing major hikes in electricity and the resulting impact on the cost of running a household. There is also the issue of increasing rates, and buyers will take this into account when deciding on a property."
YDL Investment Property CEO Anton de Leeuw agrees with Du Toit's analysis. "From an investment perspective there has been a significant drop in the buy-to-let market. Investors are worried about returns and they are worried that prices may contract even further. What we've found with our client base is that there has been a significant shift to buying distressed properties, where properties are bought at substantial discount to market value. "
De Leeuw says despite the difficult market conditions their investors are still looking at average yields of about 10%, but agrees that profits in the property market are to be made in the long haul, as quick turnaround speculative profit opportunities are becoming harder to come by.
Friday, 7 May 2010
Time for a Rate Cut ?
Thu, 06 May 2010 08:05
Difficulties getting a bond have been cited as a good reason for a further drop in interest rates but the Reserve Bank has hinted the scope for further cuts is limited.
Rawson Properties chairman Bill Rawson says in his 39 years in property, “it has seldom been more difficult to get a bond”. He says the applicant has to show that over a period of at least six months his cash flow has been able to support an outlay equal to what he would pay on his bond.
“If, for example, he has been paying R6000 a month on rent and now wants to invest R10000 a month in a home, he will have to produce very substantial evidence that he will be under no pressure to pay the extra amount.
“Impressive assets invested elsewhere will not make his application more likely to succeed: the banks look only at cash flow. They also insist on a squeaky-clean, problem-free debt-paying record, even on minor accounts such as those for retail outlets.”
Reserve Bank governor Gill Marcus said recently that interest rates were likely to stay steady “for some time”, damping speculation of another cut this month.
Marcus warned analysts not to jump to conclusions based on February’s surprise fall in retail sales, which merely confirmed “the fragile nature” of consumer spending. “The scope for further easing is limited, and the repurchase rate is likely to remain stable for some time,” she said.
Before the Bank’s last policy meeting, Rawson says, nine out of 10 economists predicted a further cut was very unlikely, but were gratified when the Bank did, in fact, cut rates. “Now, with the rate already reduced by 5,5 percentage points since December 2008 and with prime at only 10 percent, it could be argued a further cut is not needed. In my view, however, it is absolutely essential. We need it not only to help the housing market move faster, but also to boost the economy as a whole.”
Statistics SA’s January and February figures, says Rawson, show that consumer spending was down 1,5 percent and until this begins to rise there can be no significant economic upturn.
“Many emerging middle-class people are carrying far too much debt but there is a growing appreciation in some sectors that this must be reduced, especially if you hope to become a homeowner. A drop in rates will help those paying off debts, particularly those on high higher-purchase rates.”
Low interest rates, he says, will encourage people to find investments other than equities and enhance the appeal of property.
“Every now and then one reads in the press that equities have performed better than property. What these surveys do not show you is that the returns on property are usually better than those on shares for the simple reason that the majority of property buyers are bonded: their actual capital outlay is fairly small but their rents or their profits on their sales are highly satisfactory as they relate to the total value of the property.”
A further good reason for a drop in the interest rate, Rawson, says, is that, in boosting the economy, it would boost job creation. “I strongly suspect the official unemployment figures are way below the real figures. In many rural areas people are starving. In Grahamstown, I am told, more than 60 percent of employable males are jobless. All the indicators, therefore, point to the May meeting - cutting the rate by a further half point, giving us the lowest interest rate in 40 years … ” and we certainly need it at this stage in SA’s economic recovery.”
Source: Business Day
Difficulties getting a bond have been cited as a good reason for a further drop in interest rates but the Reserve Bank has hinted the scope for further cuts is limited.
Rawson Properties chairman Bill Rawson says in his 39 years in property, “it has seldom been more difficult to get a bond”. He says the applicant has to show that over a period of at least six months his cash flow has been able to support an outlay equal to what he would pay on his bond.
“If, for example, he has been paying R6000 a month on rent and now wants to invest R10000 a month in a home, he will have to produce very substantial evidence that he will be under no pressure to pay the extra amount.
“Impressive assets invested elsewhere will not make his application more likely to succeed: the banks look only at cash flow. They also insist on a squeaky-clean, problem-free debt-paying record, even on minor accounts such as those for retail outlets.”
Reserve Bank governor Gill Marcus said recently that interest rates were likely to stay steady “for some time”, damping speculation of another cut this month.
Marcus warned analysts not to jump to conclusions based on February’s surprise fall in retail sales, which merely confirmed “the fragile nature” of consumer spending. “The scope for further easing is limited, and the repurchase rate is likely to remain stable for some time,” she said.
Before the Bank’s last policy meeting, Rawson says, nine out of 10 economists predicted a further cut was very unlikely, but were gratified when the Bank did, in fact, cut rates. “Now, with the rate already reduced by 5,5 percentage points since December 2008 and with prime at only 10 percent, it could be argued a further cut is not needed. In my view, however, it is absolutely essential. We need it not only to help the housing market move faster, but also to boost the economy as a whole.”
Statistics SA’s January and February figures, says Rawson, show that consumer spending was down 1,5 percent and until this begins to rise there can be no significant economic upturn.
“Many emerging middle-class people are carrying far too much debt but there is a growing appreciation in some sectors that this must be reduced, especially if you hope to become a homeowner. A drop in rates will help those paying off debts, particularly those on high higher-purchase rates.”
Low interest rates, he says, will encourage people to find investments other than equities and enhance the appeal of property.
“Every now and then one reads in the press that equities have performed better than property. What these surveys do not show you is that the returns on property are usually better than those on shares for the simple reason that the majority of property buyers are bonded: their actual capital outlay is fairly small but their rents or their profits on their sales are highly satisfactory as they relate to the total value of the property.”
A further good reason for a drop in the interest rate, Rawson, says, is that, in boosting the economy, it would boost job creation. “I strongly suspect the official unemployment figures are way below the real figures. In many rural areas people are starving. In Grahamstown, I am told, more than 60 percent of employable males are jobless. All the indicators, therefore, point to the May meeting - cutting the rate by a further half point, giving us the lowest interest rate in 40 years … ” and we certainly need it at this stage in SA’s economic recovery.”
Source: Business Day
Wednesday, 14 April 2010
Overview on South Africa property market
14 April 2010
Where it's at and where it's going.
The South African property market is slowly gaining traction and provided lending institutions loan in a responsible manner and interest rates stay down, the market should grow by a positive, albeit modest, 9% this year.
Despite predictions that the local property market wouldn't start showing signs of recovery until 2010, things started to look up towards the end of last year and the market is already on an upward trend.
We were all prepared for a particularly gloomy 2009 but the market stabilised by September and house prices began rising by the end of the year. We believe that 2009 was nowhere near as bad as had been predicted. In fact, we believe it was actually a relatively good year for the South African property market, particularly in comparison with 2008, which was pretty dismal indeed.
Overall, the volume of property sales rose by 46% and turnover increased by 42%. House prices declined by 5% owing to the first two quarters of the year. Geffen is confident that the housing market will maintain this upward momentum as long as interest rates stay down.
There is still an excess of housing stock, particularly in certain price categories. This is due to repossessions and houses up for sale by owners who found they'd financially over-extended themselves as the recession took hold. Furthermore, stricter lending criteria and the National Credit Act have made it difficult for potential buyers to secure housing loans.
On the whole, there was waning interest in property because people were either too financially-strapped to buy houses or, against the backdrop of what was happening in the global housing market, decided that investing in property was too risky. All of this contributed to a lack of buyers and an over-supply of houses for sale. However, demand is picking up. To give you an example, this year we saw the especially notable sales of a property in Bryanston for R50 million and another in Sandhurst for R35 million. Also, the overall sales volumes being logged by our offices are currently 46% ahead of the volumes recorded at this time last year, and turnover is up a whopping 42%.
A slack in banks' lending criteria would be welcome because it would enable more people to qualify for loans and buy houses.
This would certainly help to stimulate movement and growth in the market. More importantly, it would give more people a chance to own their own home. However, lending institutions must lend responsibly otherwise it could be detrimental.
Geffen's advice to homeowners is to upgrade their properties now while the market is still warming up.
Where it's at and where it's going.
The South African property market is slowly gaining traction and provided lending institutions loan in a responsible manner and interest rates stay down, the market should grow by a positive, albeit modest, 9% this year.
Despite predictions that the local property market wouldn't start showing signs of recovery until 2010, things started to look up towards the end of last year and the market is already on an upward trend.
We were all prepared for a particularly gloomy 2009 but the market stabilised by September and house prices began rising by the end of the year. We believe that 2009 was nowhere near as bad as had been predicted. In fact, we believe it was actually a relatively good year for the South African property market, particularly in comparison with 2008, which was pretty dismal indeed.
Overall, the volume of property sales rose by 46% and turnover increased by 42%. House prices declined by 5% owing to the first two quarters of the year. Geffen is confident that the housing market will maintain this upward momentum as long as interest rates stay down.
There is still an excess of housing stock, particularly in certain price categories. This is due to repossessions and houses up for sale by owners who found they'd financially over-extended themselves as the recession took hold. Furthermore, stricter lending criteria and the National Credit Act have made it difficult for potential buyers to secure housing loans.
On the whole, there was waning interest in property because people were either too financially-strapped to buy houses or, against the backdrop of what was happening in the global housing market, decided that investing in property was too risky. All of this contributed to a lack of buyers and an over-supply of houses for sale. However, demand is picking up. To give you an example, this year we saw the especially notable sales of a property in Bryanston for R50 million and another in Sandhurst for R35 million. Also, the overall sales volumes being logged by our offices are currently 46% ahead of the volumes recorded at this time last year, and turnover is up a whopping 42%.
A slack in banks' lending criteria would be welcome because it would enable more people to qualify for loans and buy houses.
This would certainly help to stimulate movement and growth in the market. More importantly, it would give more people a chance to own their own home. However, lending institutions must lend responsibly otherwise it could be detrimental.
Geffen's advice to homeowners is to upgrade their properties now while the market is still warming up.
Friday, 29 January 2010
First-time buyer segment resilient
There is unflagging improvement in the residential market's first-time buyer segment, which rose from 14% of total buying in Q2 2009 to 19% in Q4 2009.
On top of that, it is expected to rise even further during the course of the year to comprise an even bigger share of total buying.
This was one of several positives in FNB's Residential Property Barometer for Q4 2009.
"The group probably benefits more than many others from the banks' recent relaxation of deposit requirements on home loans, as these buyers are probably a low savings group even by South Africa's weak savings standards," says John Loos, property economist at FNB.
"This source of demand is typically more cyclical than the overall market, and it is expected to rise to a higher percentage of the total in the coming quarters. I expect the growth in this segment to continue for another quarter or two.
"But it won't reach 30% of total buying like in the boom years," Loos said.
The other main positives emanating from the report are the reduction in selling time and greater price realism and affordability.
Where a property took on average 16 weeks and four days to sell in 3Q 2009, this figure dipped to 13 weeks and two days in Q4 2009. "This represents a big decline from the peak of 21 weeks and one day just two quarters ago."
In the final quarter of 2009, survey respondents reported that the overwhelming majority of sellers, i.e. 89%, still had to ultimately drop their asking price in order to make a sale. "This percentage was, perhaps surprisingly, up from the pervious quarter's 83%."
"However, the faster pace of the average sale suggests greater realism, not necessarily in the form of sellers deliberately asking for lower prices, but rather in terms of the demand side catching up, and buyers putting in stronger offers."
On the point of affordability, the report showed that the reasons for selling given by estate agents have begun to point towards a mildly better financial position of households.
"Downscaling due to financial pressure during the fourth quarter declined from 28% in Q3 to 24% in Q4. The percentage of downscaling sellers at the higher end of the market is noticeably less than the lower end."
"Simultaneously, selling in order to upgrade rose further from 12% of total sales to 15% over the same two quarters."
Loos says 52% of agents surveyed anticipate better activity in Q1 2010 when compared with Q4 2009.
But the report also had some negative findings, such as the state of the buy-to-let market, indications that the growth trend is nearing its end and a slight increase in emigration as a selling factor.
Loos said the start of a declining growth trend started appearing in Q4. "We'll start seeing a plateau in the demand for houses as the effect of lower interest rate cuts starts wearing thinner.
However, 2009's fourth quarter still saw positive growth to the tune of 23,7%, which is strong but lower than the 36,8% of Q3.
"The buy-to-let market has showed no significant improvement when its activity is expressed as a percentage of total activity. Its share of total buying is 13%, which is unchanged from 2009's third quarter."
Emigration selling expressed as a percentage of total sales rose slightly from 6% in the previous quarter to 7% in Q4. "This suggests that after the strong downward trend in this percentage, from the 20% high at a stage of 2008, the rate of emigration selling may be levelling out."
On top of that, it is expected to rise even further during the course of the year to comprise an even bigger share of total buying.
This was one of several positives in FNB's Residential Property Barometer for Q4 2009.
"The group probably benefits more than many others from the banks' recent relaxation of deposit requirements on home loans, as these buyers are probably a low savings group even by South Africa's weak savings standards," says John Loos, property economist at FNB.
"This source of demand is typically more cyclical than the overall market, and it is expected to rise to a higher percentage of the total in the coming quarters. I expect the growth in this segment to continue for another quarter or two.
"But it won't reach 30% of total buying like in the boom years," Loos said.
The other main positives emanating from the report are the reduction in selling time and greater price realism and affordability.
Where a property took on average 16 weeks and four days to sell in 3Q 2009, this figure dipped to 13 weeks and two days in Q4 2009. "This represents a big decline from the peak of 21 weeks and one day just two quarters ago."
In the final quarter of 2009, survey respondents reported that the overwhelming majority of sellers, i.e. 89%, still had to ultimately drop their asking price in order to make a sale. "This percentage was, perhaps surprisingly, up from the pervious quarter's 83%."
"However, the faster pace of the average sale suggests greater realism, not necessarily in the form of sellers deliberately asking for lower prices, but rather in terms of the demand side catching up, and buyers putting in stronger offers."
On the point of affordability, the report showed that the reasons for selling given by estate agents have begun to point towards a mildly better financial position of households.
"Downscaling due to financial pressure during the fourth quarter declined from 28% in Q3 to 24% in Q4. The percentage of downscaling sellers at the higher end of the market is noticeably less than the lower end."
"Simultaneously, selling in order to upgrade rose further from 12% of total sales to 15% over the same two quarters."
Loos says 52% of agents surveyed anticipate better activity in Q1 2010 when compared with Q4 2009.
But the report also had some negative findings, such as the state of the buy-to-let market, indications that the growth trend is nearing its end and a slight increase in emigration as a selling factor.
Loos said the start of a declining growth trend started appearing in Q4. "We'll start seeing a plateau in the demand for houses as the effect of lower interest rate cuts starts wearing thinner.
However, 2009's fourth quarter still saw positive growth to the tune of 23,7%, which is strong but lower than the 36,8% of Q3.
"The buy-to-let market has showed no significant improvement when its activity is expressed as a percentage of total activity. Its share of total buying is 13%, which is unchanged from 2009's third quarter."
Emigration selling expressed as a percentage of total sales rose slightly from 6% in the previous quarter to 7% in Q4. "This suggests that after the strong downward trend in this percentage, from the 20% high at a stage of 2008, the rate of emigration selling may be levelling out."
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
Friday, 11 December 2009
Global housing on the mend - December 2009
Investors across the globe are starting to return to residential property markets, following what has arguably been one of the longest and strongest real estate slumps the world has ever seen.
The Knight Frank global house price index for third quarter 2009 released earlier this week shows that house prices are now rising in almost 70% of the locations tracked by the British property group, compared to less than 50% in second quarter 2009. Knight Frank compares house price movements in 42 countries.
Liam Bailey, head of residential research at Knight Frank, says although house prices in almost 60% of the countries included in the index are still lower than they were a year ago, most markets have now turned the corner.
Singapore reported the biggest quarterly jump in prices with growth of 15,2% in third quarter. That was followed by Hong Kong (6,3%), Canada (4,9%), Australia (4,2%) and New Zealand (4,2%). South Africa ranks as the sixth fastest growing housing market in Knight Frank's index, with prices up 3,8% in the three months to September 2009 (quarter-on-quarter).
The UK and US, two of the countries hardest hit by the credit crunch and global recession, are also back in positive growth territory with quarterly price increases of 3,7% and 3,2% respectively.
On an annual basis, Israel is now the world' fastest growing housing market with prices rising 13,7% in the year to September 2009. That was followed by Austria (9,7%), Malta (9,7%) and Switzerland (7%). South Africa ranks 15th in the annual growth stakes with prices up 1,3% over the 12-month period.
Dubai is the biggest loser, with prices sliding a massive -47% in third quarter 2009 year-on-year (y/y). There are also a few European countries where prices are still falling on the back of what appears to an oversupply of stock. These include Spain, Denmark and Ireland.
Bailey says Dubai's recent debt woes have no doubt dented investor confidence in that country. The problems now seen in Dubai's housing market underscore the fact that the global housing recovery will not necessarily be smooth sailing, says Bailey.
However, he believes that any further house price falls are likely to be corrections rather than the start of another round of drastic reductions.
Link
Investors across the globe are starting to return to residential property markets, following what has arguably been one of the longest and strongest real estate slumps the world has ever seen.
The Knight Frank global house price index for third quarter 2009 released earlier this week shows that house prices are now rising in almost 70% of the locations tracked by the British property group, compared to less than 50% in second quarter 2009. Knight Frank compares house price movements in 42 countries.
Liam Bailey, head of residential research at Knight Frank, says although house prices in almost 60% of the countries included in the index are still lower than they were a year ago, most markets have now turned the corner.
Singapore reported the biggest quarterly jump in prices with growth of 15,2% in third quarter. That was followed by Hong Kong (6,3%), Canada (4,9%), Australia (4,2%) and New Zealand (4,2%). South Africa ranks as the sixth fastest growing housing market in Knight Frank's index, with prices up 3,8% in the three months to September 2009 (quarter-on-quarter).
The UK and US, two of the countries hardest hit by the credit crunch and global recession, are also back in positive growth territory with quarterly price increases of 3,7% and 3,2% respectively.
On an annual basis, Israel is now the world' fastest growing housing market with prices rising 13,7% in the year to September 2009. That was followed by Austria (9,7%), Malta (9,7%) and Switzerland (7%). South Africa ranks 15th in the annual growth stakes with prices up 1,3% over the 12-month period.
Dubai is the biggest loser, with prices sliding a massive -47% in third quarter 2009 year-on-year (y/y). There are also a few European countries where prices are still falling on the back of what appears to an oversupply of stock. These include Spain, Denmark and Ireland.
Bailey says Dubai's recent debt woes have no doubt dented investor confidence in that country. The problems now seen in Dubai's housing market underscore the fact that the global housing recovery will not necessarily be smooth sailing, says Bailey.
However, he believes that any further house price falls are likely to be corrections rather than the start of another round of drastic reductions.
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