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.