85% of sellers drop prices
THE property market in South Africa and the city has stagnated significantly as a result of to the global recession and the introduction of the National Credit Act.
Ian Slot, managing director of Seeff Atlantic Seaboard, City Bowl, V&A Marina and CBD, said that before 2008 the industry was generating approximately 40 000 to 45 000 property transactions a month, which has now dropped to roughly 18 000 transactions a month.
“Before 2008, a property could have sold within a few weeks with the average period being six weeks to two months,” Slot said.
The average property sale is taking an estimated five months and 85 percent of sellers have needed to reduce their asking price to make the sale.
Lee Gautschi, owner of Lee Gautschi Properties, said there are several properties for sale by investors because of bonds not being covered.
Gautschi said that because of the economic climate and rentals not covering bonds, some people needed to offload certain investments in order to make ends meet.
In a tough economy, the number of estate agents has been on the decline as well. There were roughly 90 000 estate agents in 2007, compared to the 28 000 in business today. Tough market conditions are at fault as well as agents needing to become better qualified, Gautschi said.
Dr Andrew Golding, chief executive of the Pam Golding Property group, said investors today are astute as well as discerning, and thoroughly research the market before making a purchase decision.
The high end of the market has been particularly hard hit and vulnerable to price deflation, with properties only moving when sellers are forced to reduce their price below market value, Slot said.
For instance, the Atlantic Seaboard has seen only six properties sold over R20 million, with most of these being sold on average 20 percent below asking price, Slot said.
“The Southern Suburbs has seen no sales over R30m in 2010 and in 2011 have only seen movement in the mid-price bands at R5m compared to the average price of R6.6m for the same period in 2010,” Slot said.
In Cape Town, the recovery of the local residential market has slowed significantly from early 2010.
“There were 16.8 percent more transactions registered in January 2011, this was still 40 percent below the average volumes of past decades,” Slot said.
Because of the National Credit Act, banks have introduced stricter rules in terms of their lending criteria and subsequently the rental demand market will remain strong as this continues, Slot said.
“The biggest impact of the Act has been on credit granting by the banks and the ability of consumers to obtain mortgage finance,” said Ted Frazer, Seeff national marketing manager.
Banks have had to tighten their credit granting criteria, which has led to a significant drop in the number of new home loans granted to consumers, Frazer said.
The Act provides one set of rules for all credit activities, aims to prevent reckless lending, over-indebtedness, unfavourable lending practices and it establishes rights for credit consumers.
The real estate industry needs banks to relax the criteria more so that consumers can obtain mortgage finance which will in turn aid the recovery of the property market not only in Cape Town, but in South Africa, Frazer said.