Latest SAPTG property data - is there hope for 2009?

Private Property South Africa
South African Property Transfer Guide (SAPTG)

Insights into the latest report released by the SAPTG suggest that there is hope for the residential property market in the near future. That the challenging conditions experienced across the South African real estate market over the last two years will improve in 2009.

Leading marketing insights company, Knowledge Factory, has released a report based on the South African Property Transfer Guide (SAPTG) property sales data across all major provinces in South Africa over the past five years. Entitled ‘Property Sales Data 5 Years’, the report presents an overview of historical trends and provides a comparative analysis of sales in the different provinces calculated over this period according to their sale dates. Sales valued below R100 000 and above R19 million, to and from companies as well as government departments, were excluded from the analysis.

“Affordability issues, which have hamstrung many sales from being concluded, will gradually improve during 2009 and 2010,” argues Dieter Deppisch, SAPTG national training manager and data specialist. “While we have welcomed the exacting requirements of the National Credit Act, it has made it more difficult for agents to find qualified buyers. As a result consumer sentiment and confidence levels dropped significantly over the past 24 months. With lower inflation, interest rates and a stable local macro-economy we believe that this sentiment will soon change for the better”.

Coastal regions peak above their inland counterparts.

The report shows that coastal regions, such as the Eastern Cape, Western Cape and Kwa-Zulu Natal, recorded the highest sales volumes between 2004 and 2006. In general terms coastal regions have held up better than their inland counterparts in the current property market downturn. While there is no definitive reason for this, Deppisch believes that this is due in part to ‘semi-gration’.

“Coastal regions, especially smaller areas, such as East London, The Garden Route, The South West Coast and Hermanus are viewed by many as South Africa’s ‘retirement villages’,” Deppisch observes, “and, typically, those who can afford to purchase homes there a few years before they retire, will do so. The typical buyer demographic is a higher-income earner who finds it easier to qualify for such purchases”.

In addition to semi-gration, foreigners are also a driving force when it comes to the purchase of property in the coastal regions. While the overall volume of South African property bought by foreigners is relatively small — anecdotal evidence suggests between five and 10 percent — Deppisch notes that these sales do account for a larger percentage of the overall value because foreigners tend to go for the higher priced properties. “It’s not unusual for them to buy a place in Mossel Bay or Plettenberg Bay for between R4-6 million, whereas the South African holiday home buyer is more likely to look to the R1,5-3 million range,” he confirms.

Fairing the best by declining the least

While the report reveals an overall drop in sales across all the provinces of 36% between 2007 and 2008, KZN and Limpopo — whose decline rates were approximately 29 percent each — fared a lot better than Gauteng and the North West, both of which experienced a 39% decline in volume of sales. Likewise, when comparing the total value of sales across the provinces, the Northern Cape and Limpopo, again, showed the least decline, while Gauteng and the Western Cape fared worst.

“One must bear in mind, however, that the volume of trade in Limpopo is relatively low, with buying patterns being influenced by platinum mining and the agriculture sector,” explains Deppisch. A fact that is borne out by the SAPTG report, which reveals that during 2007 in Limpopo there were only around 7,500 transaction sales between Full and Sectional Title properties and in 2008 there were just over 5,000 transactions.

“This is very small in comparison to Gauteng and the Western Cape,” clarifies Deppisch, “whose total value of transactions during the same period, despite their higher decline rates, was about 10 fold greater. These two provinces accounted for 63% of total national sales in the past 12 months.”

Hang on in there!

Drawing on the wealth of information available through the SAPTG, Deppisch argues that what the South African market has experienced in the past two years has been part of normal cyclical economic trend and a necessary, if painful, ‘correction’. Its effect on the real-estate market was exacerbated by additional negative factors such as high inflation, high interest rates and the turbulence in the world economy.

He also cites the general consensus among experts that they have weathered the worst. “We agree with economists who believe that there is going to be a turn-around by the second quarter of 2009,” he notes, “on the back of an expected 150 basis points reduction in the repo rate.”

He also refers to additional positives that should boost consumer sentiment and increase confidence within the South African economy, such as the fall in the Consumer Price Index (CPIX) inflation and the drop in fuel prices. “This backdrop, together with the fact that a drop in interest rates takes about three to six months to filter through, suggests a turning point in public sentiment towards buying residential property by the third quarter of 2009,” he concludes.

For further details about the Report or to find out more about subscribing to the SAPTG — the most comprehensive online source of property data in South Africa — visit SAPTG at www.saptg.co.za

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