The property market in 2013

31 Dec 2012

Despite the prevailing challenging economic circumstances experienced in the property market, 2012 has been a good year for RE/MAX of Southern Africa.

Adrian Goslett, CEO of RE/MAX of Southern Africa says the agency saw a 12 percent increase in sales this year despite the challenging economic circumstances experienced in the property market.

This is according to CEO of RE/MAX of Southern Africa, Adrian Goslett, who says during 2012, the agency has seen a marked increase in the number of property sales achieved per agent.

During the first half of this year they saw a 12 percent increase in sales when compared to the same period of 2011.

More than 25 franchises opened in the Southern African region up to the end of October 2012. “The brand is continuing to grow its footprint that encompasses over 170 office locations and over 1 800 experienced estate agents,” Goslett says.

Locally, RE/MAX agents account for 6 percent of total agent numbers and for 15 percent of all sales transactions, and Goslett says the average agent commission earnings are up 31 percent in 2012, compared to the 2010 figures.

However, a few elements will influence the property market and those within the industry moving forward into 2013.

Access to finance

The rand value of the gross debtors’ book for mortgages has increased, as has the number of applicants applying for bond finance. Goslett says this is due to the fact that South Africa’s financial institutions have relaxed their lending criteria to the point where close to 51 percent of all home loan applications are approved.

The rand value of the gross debtors’ book for mortgages has increased, as has the number of applicants applying for bond finance.

Goslett points out that high debt-to-income ratios and a poor savings culture are the major reasons why many South African home buyers struggle to obtain finance. South Africa has a domestic savings rate of 20 percent of GDP.

He says high debt and poor savings reflect negatively on affordability levels, which holds back the market and slows down recovery - and for this to change in 2013, consumers need to focus on clearing their debt and starting a savings programme to ensure their ability to secure home loan finance in the future.

"Due to the limited access to finance, the rental market will continue to grow rapidly, which will assist investors who have a buy-to-let portfolio."

Deposits required

While financial institutions will continue to have a greater appetite for risk, 100 percent bonds will be scarce in 2013. Statistics suggest over the last 12 months, only four out of 10 bonds granted are for 100 percent of the purchase price. This means six out of 10 successful applicants have had to pay deposits to secure a property.

The average deposit requirement for repeat buyers has risen to 20 percent of the home’s purchase price, so buyers are required to have a fifth of the purchase price in cash. For first-time buyers, who account for 35 percent to 40 percent of the home loans granted each month, the average deposit required is 12 percent of the purchase price.

Transformation in the industry

The trend of searching for property online will continue and more buyers will find their dream home through online property search portals.

A few years ago,estate agent training and qualification were at the forefront of the industry, with a strong focus on the professionalism of the industry players and many agents achieving the necessary NQF levels required. 2013 will see a transformation of the industry in the form of a revamped EstateAgency Affairs Board (EAAB).

Goslett says Tokyo Sexwale and the Department of Human Settlements are taking a proactive approach to resolving the issues within the industry and the EAAB, with the focus on professionalism and transparency.

One of the goals of the EAAB is to ensure the property industry is more representative of all races and genders, with an emphasis on attracting the youth into the industry. The number of estate agents in South Africa has dropped from 80 000 in 2008 to half that figure or less as a result of the global economic recession.

Goslett notes that real estate businesses that encourage transformation will continue to thrive in the market spectrum. RE/MAX of Southern Africa has, for a number of years, been highly rated as a BBBEE organisation.

Technology

With constant technological advancements,it will continue to play a vital role in the property industry in terms of marketing strategy and interaction between real estate professionals and their clients.

The trend of searching for property online will continue and more buyers will find their dream home through online property search portals.

Fair market value

Next year, property pricing and the perceived value of property will continue to be an important factor to the success of a sale. If a property is priced correctly it will be sold within the first four weeks of being on the market and will generally sell at the asking price. 

“Although sellers are the ones that set their asking price, property pricing within a certain market is largely determined by what a buyer is willing to pay for that property,” says Goslett.

According to ABSA, the first ten months of 2012 saw house prices drop by 0.6 percent year-on-year, while the FNB house price index revealed a house price growth rate of 6.6 percent in August this year. The index's average price of homes transacted was R865 900.

Goslett says that although house price growth has improved, RE/MAX expects trading conditions and the house price growth will stay relatively low during 2013 and follow a similar path to what we have seen over this year.

“With property market activity constantly increasing, so much so that certain areas are reporting stock shortages of certain types of property, 2013 is bound to a year of change with transformation coming to the fore of the property sector,” says Goslett.

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