Buying or selling - what to expect?

South African estate agents are optimistic about the property market in 2012 as consumers are set to continue to buy and sell property.

It is very possible that principals of estate agencies will introduce a penalty on the commission the agents themselves receive if the sale takes too long.

According to Anton du Plessis, chief executive officer of the Cape Peninsula estate agency Vineyard Estates, fast recovery in the market or not, there are factors that will impact positively on the property market this year.

Firstly, he says people will continue to buy and sell property.

House trading only comes to a complete standstill where a country is near collapse and that certainly does not apply to South Africa.

Du Plessis expects sellers to come round and accept the real market values of their homes.

“We are seeing a new stability in the market and an acceptance of price realities that was not evident before.”

He says usually in December and January, people tend to reflect and plan what they would like to do going forward.

This in turn often leads to potential buyers at last taking action.

“Many sellers have been holding out until the year end to achieve their now inflated asking prices.”

These sellers will, with the reflection phase that the holidays allow, reduce their prices to a market related level, he says.

He says estate agency principals may at last decide to abandon sellers who have refused to acknowledge market realities and continued to hold out for unobtainable prices.

“In 2012, I believe principals will be far more hesitant about taking on overpriced properties and will break loose from those they have.”

It is very possible that principals of estate agencies will introduce a penalty on the commission the agents themselves receive if the sale takes too long.

The principals will argue that they cannot afford to pay the agent full commission if the agent is taking on unrealistically priced homes which sit on the market for years with no return to the agency.

Instead, where a house does not sell within six months, the agent’s share of commission will decrease to make up for the extra advertising the agency is carrying, he explains.

Meanwhile, Seeff chairman Samuel Seeff says reasonable demand will remain in the property market.

He says the economy would need to pick up before expecting any real strength returning to the market.

“I believe 2012 is likely to see meaningful gains in clearing distressed properties out of the market and with a little fortune, no further interest rate hikes,” says Seeff.

Combining these factors with reasonable market demand, we are still likely to see low sales volumes given the continued financial constraints and high bank decline ratios, he says.

Seeff says with almost no new development during the past two to three years, this means 2013 will be the time that there will be a restoration of activity in the South African real estate market to levels pre-2007 when the Credit Act was introduced.

Throughout 2012, sellers will still be competing with distressed properties and while the next year will see some clearing of debt, the banks are likely to remain reluctant to lend with any great enthusiasm.

Sellers looking to sell during next year and into 2013 are going to have to price very conservatively and take heed of real estate agents’ advice on the market as to what buyers are prepared to pay.

Buyers with cash should negotiate strongly and will have plenty of time to consider their options and obtain the best possible price on their terms.

He says buyers should be aware that these conditions are unlikely to continue beyond 2012.

“It is my view that the pent up demand that has been in place since 2007 will start impacting on the market, assuming that the banks are able to clear impairments and debt out of the market.”

Only once turnover in the market picks up, are we likely to see an uptick in prices, but this will be mild in strength and will remain as such throughout 2013 and 2014, says Seeff.

Peter Gilmour, chairman of RE/MAX of Southern Africa says this year will see a big shift in consumer behaviour.

Gilmour says consumers are often basing their purchasing decisions on a set of values that focus on service levels and the quality of the product offering.

This is because today’s consumers are research driven, and can compare products and services quickly and efficiently to ensure that they are getting the best value for money and purchasing through socially responsible organisations.

Global shopping malls and online shopping is featuring as a purchasing vehicle more so than ever before, which means today’s consumers are exposed to a larger range and therefore have more choice.

The continuing trend towards a more urban lifestyle is also a big influence on purchasing decisions as more and more people move into the world’s cities.

In fact, it is estimated that by 2030, 75 percent of the world’s population will live in the city areas, compared to the 1960 figure of 30 percent, he says.

Gilmour also notes that for the foreseeable future those businesses that promote and encourage Broad Based Black Economic Empowerment (BBBEE) will continue to thrive and gain support across the South African market spectrum.

He predicts that interest rates will remain stable for the next 12 months.

Gilmour adds that while deposits of between 10 percent and 30 percent will remain a reality for would-be buyers, he expects to see a greater risk appetite from the financial institutions

On access to finance he says in 2011, South Africa’s financial institutions relaxed their lending criteria to the point where close on 50 percent of all home loan applications were approved.

This is a vast improvement from the 26 percent home loan approval rate recorded in the midst of the recession in April 2009, but still a long way off the approval rate of 80 percent achieved at the height of the boom in 2007, he says.

He adds that while deposits of between 10 percent and 30 percent will remain a reality for would-be buyers, he expects to see a greater risk appetite from the financial institutions. – Denise Mhlanga

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