A further decline in the South African Reserve Bank leading indicator means weakness in the mortgage market and the value of new mortgages granted.
This three-bedroom home is located in Schapenberg Estate, one of the top secure estates in Somerset West, and enjoys sweeping ocean and mountain views. It was recently sold by Pam Golding Properties for R2.55 million.
This is according to FNB Home Loans property strategist, John Loos following the release of the South African Reserve Bank (SARB) Leading Business Cycle Indicator yesterday.
On a month-on-month basis, the Leading Indicator fell by -2.1 percent representing a downward acceleration of -1.5 percent in August.
Loos says on a three month moving average basis, there was a month-on-month decline to -0.6 percent. Year-on-year (y/y), the Indicator was 1.1 percent higher than August 2010.
He explains that there is a broad correlation in the direction of the y/y change in the Leading Indicator and that of the value of new mortgage loans granted (residential and commercial, with residential being the dominant component).
From March to June, the value of mortgage grants was already in y/y decline.
While statistics suggest tough times still exist in the residential property market, estate agents who sell property are seeing new interesting trends of where buyers get the cash.
Of course, they admit that some buyers battle to get home loans but say buyers with cash are actively buying.
What’s more, the return of the Baby Boomers is set to become a driving force in the property market as they have accumulated money to help their children enter the property market.
Born between 1946 and 1964, the ‘Boomers’ were of course largely if indirectly responsible for the post-war recovery in housing demand and prices, with the buyers being their own parents.
A second major wave of property prosperity followed in the 1980s when many Boomers were in their 20s and 30s and buying homes of their own, says Rudi Botha, chief executive officer of Betterbond.
“It seems the boomers may play a key role in a market upturn for the third time as they help to fund home purchases by their children and grandchildren.”
Botha says the biggest stumbling block for potential homebuyers, and first-time buyers are the lenders’ requirement that they pay cash deposits of up to 30 percent of the purchase price.
He says this is not just a problem in South Africa, banks worldwide want people to invest some of their own money in their homes.
In South Africa and overseas, a number of parents and family members are assisting younger buyers to become homeowners by lending them the money for these deposits.
A trend he believes is a major factor in the increase in the percentage of sales to first-time buyers.
Usher says because of the recent sales, stock at Century City has been sold out. He adds that only eight of the 41 apartments in Little Moorings are remaining.
In many cases, the deposit money is coming from the equity that Boomer parents have built up in their own homes.
He says usually this is not in the form of an equity loan, but often part of the proceeds of the sale of a big family home as Boomer parents increasingly downscale to smaller, more secure and easier to maintain properties.
Boomers are finding that housing deposits for their children or young relatives are actually pretty good investments.
He adds that this is great for the parents because there are few other places they could safely put excess cash at the moment and get an annual return of around 9 percent.
In the suburb of Alberton situated in Ekurhuleni in Gauteng, young buyers are snapping up homes priced from R400 000 to R10 million.
Alberton which is 106 years old is close to the Johannesburg CBD with easy access to the city’s major highways.
According to Martin and Jenny de Necker, broker/owners of RE/MAX All Stars operating in Alberton, Johannesburg south and Germiston, buyers in these locations are families looking for well-priced homes.
Buyers prefer freestanding houses and sectional title units.
Lightstone revealed that 40 percent of recent buyers in Alberton were aged between 18 and 35 and close to 70 percent of the suburb is made up of freehold homes with the balance being sectional title units.
During 2011, the average price of freehold homes sold in Alberton was around the R795 000 and sectional title units sold for an average of R428 000.
In Cape Town, buyers are fast buying homes at Century City pushing sales to R60.8 million since July 2011.
Brian Usher, sales manager of Property World selling units at the Century City says property sales include 26 developer sales valued at R43.8million and 12 re-sales to the value of just under R17 million.
Usher says because of the recent sales, stock at Century City has been sold out. He adds that only eight of the 41 apartments in Little Moorings are remaining.
More young buyers are reportedly flocking to Boland and Overberg regions of the Western Cape say Pam Golding Properties (PGP).
PGP says buyers are aged between 20 and 29 and this buyer age group grew to over 60 percent in the first six months of the year.
Annien Borg, managing director for PGP in these areas says the average sale price for this age group was R950 000 adding that it is encouraging to see so many first-time buyers enter the property market.
Borg says a number of buyers have bought in new developments such as The Village at Diemersfontein Wine Estate outside Wellington.
A two-bedroom house can cost from R699 000 and a three-bedroom home up to R1.5 million.
She explains that the highest demand is for homes priced between R800 000 and R3 million.
Pam Golding Properties sold this 18th century Cape Dutch homestead in Swellendam for R2.7 million. The home is a national monument, currently run as a guest house.
"The bulk of our buyers continue to be existing Western Cape residents and many of them relocating within their home towns or else relocating from Cape Town into smaller towns.”
We are also seeing relocations from those working in Cape Town’s Northern Suburbs, for whom the commute to Paarl or even Somerset West is easily manageable.
Other purchasers include upcountry residents, mainly from Johannesburg and Pretoria, she says.
Borg says there are few international buyers at present, but believes this may begin to change in the coming summer months, due to the weaker rand.
The months of October and November are the prime international tourist season for the inland towns of the Boland while December and January sees a huge influx of visitors to the coastal areas of the Overberg, such as Hermanus, Kleinmond, Pringle Bay, Betty’s Bay and Onrus.
“We are confident that the current exchange rate, coupled with the excellent value for money on offer in the holiday home market, may attract more international-spend on property.”
She adds that the Boland and Overberg regions remain popular with buyers across the spectrum, from first-time entrants to the market to families seeking a wholesome lifestyle. – Denise Mhlanga
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