10 Sep 2012
Many of South Africa’s estate agencies are often reluctant to try and establish franchises in areas where the vast majority of buyers are ‘disadvantaged’.
It has to be admitted that such areas can and do present an estate agency with a range of challenges not usually encountered in areas where property trading has a long established history and people are familiar with property law.
A major difficulty faced by agents in such territories is the lack of knowledge on what constitutes a good credit record.
The Rawson Property Group franchisee for Pretoria West, Cynthia Chuene, says her franchise has always had to accept that its clients’ bond applications stand a good chance of rejection. Out of every 10 applications, six will be declined because of bad credit records.
Their market has not yet learned to understand the negative effects of paying accounts late or allowing unnecessary debt to mount up, says Chuene.
Another challenge they face, she says, is the high rate of deal cancellations emanating from a lack of respect for contracts.
Chuene explains that they have many clients who go as far as obtaining 100 percent bond finance from a bank, only to cancel once the deal is about to move to the next stage in the process.
Chuene says reasons for these bond finance cancellations vary from one client to the next but ‘cold feet’ and a fear of commitment have been evident in many cases of this kind.
The third biggest challenge this franchise’s clients face, Chuene says, is raising bond and transfer fees.
Unless a client’s purchase can be classified as affordable housing, he is expected to raise and pay transfer fees and in their market these fees can be as high as R14 000, which is a lot of money for their clients, she says.
Many of their deals fall through due to these transfer fee issues and to the inability to raise a 10 percent deposit where the bank is only providing 90 percent bond finance.
Despite these difficulties, Chuene’s venture is one of Rawson Properties most successful in black residential property. Her franchise employs five experienced agents and its territory covers such suburbs as Soshangune, Mabopane, Proclamation Hill, Danville, Lotus Gardens and Atteridgeville. Many of these suburbs have been there for several decades and have settled communities.
These Pretoria West precincts, she says, have always been popular with black buyers because not only are they affordable but they are close to the CBD, to the technikon and to UNISA and to a range of big industrial complexes including ISCOR, Exarro and several major industries including motor assembly plants.
In addition, these suburbs have established schools, good retail centres and are served by efficient bus networks, she says.
Jeff Mantjabadi, a senior agent with the franchise, says the price range does suit the emerging black middle class, among many of whom there is a noticeable determination no longer to go on paying rent but to get on the property bandwagon and become homeowners.
The savings and wealth creation potential inherent in property, Mantjabadi says, is something that today’s new black middle class understands very well.
In his area, he says, Lotus Gardens and Atteridgeville can offer buyers homes priced as low as R450 000, but in other areas, such as Wespark and Kwaggasrand homes are priced up to R1 million, often with large stands and newly renovated buildings. These prices, Mantjabadi says, suit the emerging black management class well.
It is, however, extremely hard to obtain finance for sectional title units in Pretoria West as these schemes often cannot produce the meticulous financial accounts that banks insist on seeing, says Chuene.
As yet, Mantjabadi says, prices are showing no signs of rising in response to the steady demand.
However, he believes this situation will change by early 2013 and by then he expects Chuene’s franchise to be selling eight homes per month – it is already achieving average monthly sales of five homes per month.
The area supports at least five estate agencies, he says, and competition for stock and for clients is stiff.
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