It’s hard to believe that 2013 is almost over. It seems like just the other day we were kicking off a new year. Every year brings with it an expectation. So what happened in real estate locally, and what trends have developed?
It was initially forecast that property values would experience steady growth of 7 – 10% in 2013, and the market did not disappoint. Across the board there has been good growth, and in high demand prices ranges under R 2 million we have seen growth by as much as 12% in some markets.
Property growth is a product of “supply and demand” market forces. When there is a lot of property available for purchase and few buyers, then property values remain flat, or in some cases even drop.
Where stock levels drop and buyers increase, this has the effect of increasing prices. And that’s exactly what we’ve seen, especially in the Somerset West property market. Early in the year stock levels were at approximately 900 properties listed for sale. As the year has progressed this has reduced to something in the order of 550 – 600 properties.
At the same time there has been a healthy increase in the number of buyers in the marketplace. There is still a steady flow of buyers from Gauteng and other parts of South Africa, and earlier in the year a noticeable increase in the number of overseas buyers making a purchasing decision.
In addition to this, banks have regained some appetite in the home loan market. There hasn’t been a dramatic change from the banks though – with most of the banks proceeding very cautiously. However, certain banks have been trying harder to gain market share, and this means the consumer has a better chance of obtaining finance with 50 – 60% of all applications being approved.
Whilst on the topic of the banks, a noticeable trend has been the banks’ pricing on home loans. Whereas previously a buyer could almost always expect a home loan interest rate of Prime or less, the average rate is now well over Prime, and in many cases buyers are only being offered Prime + 1 or 2%. So the banks are balancing their slightly keener stance of bond approvals with larger profit margins to cover for possible future bad debt.
Nevertheless, the increase in purchasers and their improved chances at home loan finance has resulted in much improved sales volumes. In many parts of South Africa real estate companies have reported an increase in the number of sales by as much as 20%. Locally, at Harcourts Platinum, we have seen an increase in sales by 52%.
Interestingly, a large part of this increase has been the strong demand for properties in new developments and security estates. Developers have seen the benefits of offering a completed “turnkey” product to buyers, and these listings have sold exceptionally well.
Looking back the best way to describe 2013 is “steady recovery”. That’s a positive trend and gives the consumer and property owner confidence in the long-term benefits of property ownership. And let’s be honest – who wouldn’t want to live in such a spectacular part of the world! Enjoy your well-deserved holidays and I’ll greet you again in 2014.
Principal of Harcourts Platinum, and Director of Harcourts South Africa
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