It’s interesting to note that, according to statistics in the oobarometer, the average purchase price of property has increased from R 819 997 in December 2010, to R 870 564 in December 2011.

The average approved bond amount has also increased from R 697 572 in December 2010, to R 722 529 in December 2011.  Bond applications for the same period have increased 25%, showing that buyers are keen to purchase at current market prices.

Of concern though is the average effective approval ratio of 59.8%, compared to 67.8% in December 2010.

That means for every 10 finance applications, 6 will be approved, down from 7 out of 10 a year ago.  This confirms the poor appetite the banks have for home loan finance, and the fact that they are picking only the “low-risk” deals.

There is great value to purchasers to use a mortgage originator like ooba as 22% of all applications that are initially declined by one bank, are approved by another bank.  This means that, if you are serious about purchasing, you need to use a professional loans consultant who can submit your application to mutliple banks and give you a much greater chance of approval from at least one bank.

If you are looking for a 100% bond though, be prepared for dissapointment.  The ooba statistics show that only about 20% of all 100% bond applications are approved at 100%, with another 21% approved at a lower Loan-to-value (such as 90%), and 59% being declined outright.

So, if you are looking to purchase, try to save enough for a 10% deposit where your chance of obtaining finance more than doubles.  Sellers and estate agents are aware of the low success rate of 100% bond approvals – so the chances of your offer being approved are greatly improved if you have a deposit to put down, and if you use a mortgage originator to greatly increase your chances of approval.

Source: ooba

In a very similar vein to the report released by ABSA in December, FNB confirmed that house price growth in 2011 slowed to about 3% in nominal terms.  When taking inflation into account at an official rate of 5%, this translates into a depreciation of 3% in Real Terms.

In other words, if you owned a property that was valued at R 1 000 000 a year ago, it would be worth R 1 030 000 today.  However, if you take inflation into account, you would need
R 1 050 000 to purchase what would have cost you R 1 000 000 a year ago – so you would have decreased your asset base by 2%, or R 20 000.

What will happen in 2012?  FNB says that the European Credit Crisis, as well as huge levels of debt in the USA – the worlds’ largest economy – mean that global economic recovery will continue to be slow in 2012.

Given these facts, and the reality that a solution to the global economic woes is not yet in sight, FNB comments that it will be a few years before the property market begins to flourish.

So, if you are a property Seller the message from the top economists is that property prices will not outpace inflation for the next few years.  Don’t hold your breath – unfortunately global economic forces mean that your property value will not increase to the point that it makes any sense to hold out for a market improvement.

If you need to sell, then it makes sense to sell today.  Price your property correctly and ensure it is aggressively marketed by a professional real estate company.  That’s the only way to ensure that your property stands out in the crowd from the hundreds of other listings – and, if correctly priced – it will sell.

The longer you take to sell, the less you will achieve in real terms.

But the good news is that property prices are not declining as they did in 2009 when they declined by almost 10%.

We need to continue to tighten the belt and remain realistic.  Our economic survival will depend on our individual determination to save where we can and to spend wisely.  There are numerous excellent buying opportunities – but sellers need to appreciate that there is no evidence of a quick recovery to the property market.

Source: FNB Property Barometer 9 January 2012

For Harcourts Platinum in Somerset West, December 2011 was an excellent month for property sales – their best December in history.  Decembers are usually much quieter months for property sales, but the fact that this December was busy is an indication that property purchasers are ready to commit to a purchase when they see fair value.

For the past few years property sellers have been hoping that the property market and world economies would improve.  This resulted in many sellers being reluctant to price their properties correctly and buyers being unprepared to overpay for property.

In the 3rd and 4th quarters of 2011 there was an indication that property sellers in the Helderberg area were coming to terms with the market, and adjusting their prices in line with market feedback.

The result? Sales!  Yes, in any market, when a product is correctly priced and there is demand, this will result in a sale.

Fortunately there is always going to be a strong demand for property, as it’s a basic necessity, and a basic right, for people to live in a home.

So what’s the good news for 2012?

Hopefully we should see the South African banks maintain their appetite for homeloans, even though it is tempered by their desire for only row-risk lending.

Property sellers should continue to price their properties realistically.  A professional estate agent should be able to provide them with a realistic Comparative Market Analysis which will show what the market value is.

The major banks agree it’s unlikely that property prices will increase in 2012, and any increase won’t outpace inflation, which is estimated at 6-8% this year.

So, if you need to sell in the next 2 to 3 years all indications are that you are better off pricing correctly and selling now.

And, if you’re buying – there has never been a better time than now with prices again being realistic, banks granting finance to credit-worthy buyers, and interest rates the lowest they’ve been in decades.

Roll on 2012!  And let’s keep the positive sentiment going!

Typically December isn’t the most active time in Real Estate, as most buyers commence their vacation and switch into “holiday mode”.

But Harcourts Platinum in Somerset West reports that there is much activity and there is a steady stream of enquiries for their property listings. 

“We’ve had good sales in Somerset West, and a buzz of activity in Gordon’s Bay”, says Steve Caradoc-Davies, principal of Harcourts Platinum.

“What’s interesting to note is that about 25% of our December sales thus far have been Cash – which is a refreshing change from the usual”, says Caradoc-Davies.

Statistics from the banks confirm that about 48% of all bond applicants in South Africa have Credit History problems, which makes obtaining house finance unlikely.  So Cash sales are very attractive to property Sellers – who know they have a guaranteed sale.

Despite a difficult economic year, it’s reassuring to see that property purchasers are making the commitment to buy property when they see it is fairly priced and meets their needs.

Poorly performing European and US economies will have adverse affects on the South African economy, which will impact on inflation which is expected to breach the 6% target in 2012.

At a national level, property appreciated on average 3% in Nominal Terms.  Allowing for inflation at 6%, this means in Real Terms property depreciated by about 3%.

Accoring to our research at Harcourts Platinum, property values in Somerset West have remained flat for the better part of 2011.  The ABSA outlook predicts a similar pattern for 2012.

What does that mean for the consumer?  The good news is that property prices are not falling, like they did in 2007.  So, if you are a property purchaser looking for a home for your family, now is as good a time as any to buy.  In fact, there is excellent value to be found from Sellers who listen to the Market and price correctly.

So shop around, and don’t hesitate to purchase a property that meets your requirements.

The bad news for property Sellers is that the economists don’t predict any improvement for 2012, and probably not for the next few years.  So, if you need to sell within the next few years, you are better off pricing correctly and selling now, as your asset isn’t set to improve in value for a few years, especially if you allow for inflation.

The future is uncertain, and not just in South Africa, but even more so in Europe and the US.  What we do know is that, historically, property has always been a sound investment.  So, buy while the prices are realistic and the banks have an appetite for finance.

And, if you are need to sell your property then price it correctly and the Market will respond. But don’t hold your breath for any significant improvement in the next few years as the economists will tell you there is no evidence to suggest that this is likely to happen.

Follow our Blog and stay in touch with local real estate activity in Somerset West, Gordon’s Bay, and The Strand.

We’ll keep you informed of the latest property trends, market news, and selling and marketing news that relates to Real Estate.

We’ve been selling property in the area since 1972! That’s 40 years…. So we’re well positioned to keep you informed.

If you want to know what’s for sale, just click here to go to our Website: Harcourts Platinum Properties