South Africa’s residential property outlook is decidedly more positive with a number of factors resulting in renewed confidence, and the effects are being felt by estate agents who say the number of qualified buyers entering the market is steadily growing and is significantly up when comparing the previous three months with the first nine months of 2009.
Bruce Swain, managing director of the Leapfrog Property Group, says sales are increasing steadily and the number of buyers is definitely starting to outstrip supply in many areas throughout the group’s 50-plus franchise catchment areas.
“There has been a lot of doom and gloom about the fall in the property market, and yet South Africa is the best performing housing market in the world over the long term according to the latest figures from Britain’s The Economist. The magazine’s global house price index shows that SA house prices rose by a cumulative 418% over the past 12 years, far outstripping any of the other 20 housing markets tracked by the index. The next best performers were Australia (181%), Britain (175%) and Spain (167%) over the same time,” says Swain.
Latest data from FNB also shows that the price of the average SA house increased to R764 912 in January 2010, which is 1,2% higher than the average price of R755 390 recorded in 2008. The data also shows that average house prices are up 9,7% from the second quarter of 2009 when the SA housing market was at its lowest and prices reached an all time low of R696 755.
South Africa is one of a handful of countries where house prices are back to their 2008 peaks, says Swain.
“A number of factors are driving the positive market sentiment and confidence in property, including favourable interest rates, inflation rates, relaxed credit extension policies, loan-to-value (LTV) ratios, realistic property prices and an overall more positive consumer outlook.
“The length of time that a property is on the market before being sold has also reduced dramatically from a record high of 21 weeks and one day in the second quarter of 2009 to 16 weeks and four days in the third quarter, according to FNB data.
“A survey of Leapfrog franchisees in January shows that the time a house spends on the market is now an average of eight weeks, which is a huge improvement.”
Swain says although offers are coming through from potential buyers financing still remains one of the biggest challenges, with an average of 40% of bond applications being declined. Statistics from Betterbond show that in October 2009 just over 48% of applications were declined but in December 2009 this dropped to around 43%.
“There is still a big improvement though in the lending environment compared with the lowest point in 2009 when only around 30% of bond applications were being granted. However, buyers still have to be realistic about the fact that their indebtedness and credit history are deciding factors in the granting of bonds. Many buyers are not upfront with their agents about their true income, liabilities and credit history, resulting in declined applications after weeks searching for properties.
“Agents should be able to work out realistically what loans buyers will qualify for and save a lot of time and effort searching for properties within a price range that buyers would simply not qualify for. For now 100% bonds are still the exception and buyers still need to put down at least a 10% deposit,” says Swain.
