Property Advice

What's on the cards for 2013?

Private Property South Africa
Lea Jacobs |
What's on the cards for 2013?

Every year various South African real estate companies reveal their predictions for the next 12 months. Private Property takes a peek into the property crystal ball and sees what's on the cards for buyers, sellers and estate agents in 2013.

Lew Geffen, chairman of Sotheby's International Realty in SA, says he expects a "much more buoyant" residential property market in 2013. "The recession is over, not only economically but also psychologically, and consumers are now much more confident about moving on with their lives and advancing their home ownership plans. Housing demand is thus increasing at all levels, and although bank caution is slowing sales in the under R1,5-m category, this is much less of a problem in the higher price sectors, where buyers generally require finance for a smaller percentage of the purchase price."

Lately, he says, his company has experienced a sales surge in the R6-million to R10-million range, driven mainly by SA buyers taking the opportunity to upgrade to larger and more luxurious properties at the current favourable price levels - in the firm belief that these will not hold for more than another year. With regards to overall price expectations for 2013, Geffen expects growth to be constrained at around the level of inflation until more stock is absorbed, but is confident that they [what is ‘they’? prices?] will start to climb strongly in 2014, "which will be the start of a new boom".

Jan Davel, MD of the RealNet estate agency group, says household finances are likely to remain under severe pressure in 2013, which will limit the ability of prospective buyers to qualify for bonds and become homeowners.

On the one hand, he says, the increased consumer appetite for credit in 2012 has been matched by aggressive lending in the personal loan environment, and many households will be carrying an increased debt load into 2013.

"On the other hand, real disposable incomes are likely to shrink due to such factors as Eskom tariff hikes, rising food and fuel prices, higher municipal rates and the introduction of e-tolling."

He says that although debt ratios have been declining these, in many cases, are going to go back up again and choke off demand. Because of this, he believes that many households will simply not be able to qualify for a home loan, despite the fact that interest rates are expected to stay low in 2013.

"And those same low interest rates will make it difficult even for those without much debt to grow their savings and pay the substantial deposits that banks so often require now in order to grant a loan."

As far as those working in the real estate industry are concerned, he says that the industry will be going through a 'detox' procedure in 2013. Current real estate practitioners have until the end of 2013 to bring their minimum qualifications up to date, while Continuous Professional Development has also been brought into play.

"These barriers to entry, together with legislation like the Consumer Protection Act, rising consumerism, ever improving technology and a much more efficient Estate Agency Affairs Board will all have an extremely positive influence on the industry, since agents who don't pay attention to the new training requirements, skills intensities, rules, procedures and market conditions will be unable to keep up with those who have geared up for a more professional arena.

"In other words the industry will be say goodbye to many of the 'not-so-good' operators."

More positive news is that Berry Everitt, MD of Chas Everitt International property groups says that 2013 will be the year when property developers start making a moderate re-entry into the market.

"There has of course been some development at the lower end of the market for the past few years, because buyers in this sector are often subsidised or able to gain special access to 100 percent home loans. However, what I anticipate now is that developers will become increasingly active in the R650 000 to R850 000 price bracket where the banks are lending well, especially on newly-built homes."

And speaking of banks, he believes they will continue, for most of next year, to keep a lid on the market by valuing properties and lending according to "bank security value", which does not necessarily coincide with actual "market value".

"In other words, they will often not be prepared to lend as much as the prospective buyer is willing to pay, leaving the serious seller little choice but to lower his price if he wants to conclude a sale."

An alternative response, Everitt says, might be for the buyer to raise the amount of his deposit, "but in practice this seldom happens, and it is much more likely that, if the seller won't budge, the buyer will abandon the deal and look for a cheaper property.

"So either way, this practise is likely to prevent the rising housing demand that we see occurring next year from being translated, as it usually would be, into rising property prices. In fact, we do not expect to see nominal house price growth top inflation next year."

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