SA faring well on a global scale

The South African property market is performing well compared to other global markets and the World Cup will affect the real estate market over the long term.

"South Africa is one of the better performing global real estate markets. When comparing sales activities and signs of market recovery with the other 72 countries RE/MAX International operates in, South Africa is one of the forerunners. Over the last two months, we have seen a gradual improvement in the number of national property sales transactions in the country. This is a result of the change in the credit lending criteria from the banks, and the interest rate reductions by the MPC," says RE/MAX International's Vice President for Franchise Sales, Peter Gilmour.

"We are anticipating a gradual strengthening of the South African property market over the next three quarters along with improvement and growth in property values. We expect a full recovery of the market will not happen for a couple of years.

Commenting on the 2010 FIFA Soccer World Cup's impact on the real estate market, Gilmour said he is reserved about a major once-off boom.

"I anticipate that the World Cup's impact on foreign real estate investment in South Africa will yield results over the long term, more specifically over a 2–3 year period after the event. Foreigners visiting South Africa during the 2010 World Cup will be in a 'vacation' - and not 'property buying' - mode, but will be impressed by the real estate opportunities they see.

"Europe is depressed and investment opportunities are few and far between. However, investors with capital reserves visiting South Africa will have a renewed interest in the country based on its property investment returns, economic stability and the opportunity to spend the European winter here. US investors are at this stage wary of overseas property investment and are unlikely to be a factor in real estate investment," he says.

South Africa enjoyed a robust 10% year-on-year (y/y) appreciation in the value of properties before the recession – in the US before annual growth on properties' value was 3-5%. "The country remains one that is high on the list for European investors who will be watching South Africa's recovery with interest.

Jacques du Toit, property economist at Absa, says the SA property market also took a lot of pain with declining house prices, properties repossessed and low volumes of transactions, "but compared with some developed countries, we fared relatively well".

"In many of the developed countries prices dropped by 10% or even 20% and more, while prices are still declining in many countries, although at a slower pace than in the past."

As far as the impact of the World Cup is concerned, Du Toit says it is difficult to say how it will boost the market, as it will also depend on the number and type of visitor we will get. "Not all foreigners coming to SA will be buying property or will be in a position to do so. However, one should except that transactions will most probably follow as a result of people visiting the country."

Dr Andrew Golding, CE of Pam Golding Properties (PGP), says the World Cup is going to put the country on the world stage and advertise South Africa and by implication its property opportunities to a global audience, really for the first time on such a mammoth scale. "It is the long-term effect which I am really excited about and which I think will have long-lasting and positive benefits for the property industry in SA in years to come."

"While sales to foreigners have been relatively slow over the past year, I anticipate that once the world sees what SA has to offer, the long-awaited potential of direct foreign investment into property might well be realised over the next 10 years. And we fully expect foreign investment by way of property to increase slowly and steadily during the period after the tournament."

According to data released by Ritztrade International, a migration company based in Cape Town, SA's house prices are still the lowest in the world. Whereas an average two-bedroom flat in 2008 cost R6m in London, R2,4m in Toronto, and R2,7m in Madrid - it boasted a modest price tag of R360k in Johannesburg. – Eugene Brink

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