Mar­ket has adapted to tough times

Weekend Argus (Saturday Edition) - - PROPERTY -

THE PAST year saw prop­erty sales fall off by at least 50 per­cent, an ex­treme scarcity of bank loans and a mar­ginal fall-off in prices, which made trad­ing con­di­tions ex­tremely tough and left agen­cies com­pet­ing in a mar­ket that halved overnight, Dr An­drew Gold­ing, CE of the Pam Gold­ing Prop­erty (PGP), told jour­nal­ists at a me­dia event last year.

“All com­pa­nies have had to adapt and we have been no dif­fer­ent. Since the mar­ket started to turn down more than 18 months ago, PGP has man­aged to re­duce its over­heads by more than 30 per­cent. This in­cluded some re­trench­ments and nat­u­ral at­tri­tion in agent num­bers, amount­ing to close to 20 per­cent re­duc­tion in per­ma­nent staff and a 25 per­cent re­duc­tion in agents. This is seen against the back­drop of a res­i­den­tial real es­tate in­dus­try where more than 50 per­cent of reg­is­tered agents who were present 18 months ago are now no longer in the in­dus­try... those num­bers may even have dropped by more, from a high of 80 000 agents two years ago to some­where in the or­der of 25 000 agents.

“Al­though th­ese cir­cum­stances have been chal­leng­ing, they have also given us the op­por­tu­nity to make the firm more ef­fi­cient and cer­tainly more fo­cused on its core busi­ness. In ad­di­tion… there has been a sig­nif­i­cant in­crease in mar­ket share. We have man­aged to re­tain our top agents as well as re­cruit a num­ber of top agents from other com­pa­nies through­out the coun­try.

“Al­though trade in lux­ury homes has been thin, it has con­tin­ued to sur­prise us with its abil­ity to push the top end of the SA res­i­den­tial prop­erty mar­ket to new lev­els, and t h e r e h ave b e e n we l l - r e c o r d e d record sales in SA’s top sub­urbs. It is not in­con­ceiv­able that prices will con­tinue to rise as dis­cern­ing buy­ers find value in SA’s very top prop­er­ties, so it’s not sur­pris­ing that prop­er­ties are now be­ing mar­keted at R100 mil­lion and more.

“The af­ford­able hous­ing seg­ment, the low price seg­ment, the mid-seg­ment, and the high seg­ment, have all been cat­e­gorised by a dra­matic fall-off in sales; a moderate re­duc­tion in prices – prob­a­bly 10-15 per­cent over 18 months; a marked re­duc­tion in the abil­ity to se­cure mo r t g a g e f i n a n c e a n d a t r e n d to­wards much higher eq­uity prop­erty sales; and a re­quire­ment for cash de­posits and gen­er­ally sig­nif­i­cantly more cash sales than be­fore.

“We have had to be ex­tremely strict when record­ing what we be­lieve are com­pleted sales. With the in­se­cu­rity about mortgages and the gen­eral state of the mar­ket, we now have sig­nif­i­cant pipe­line busi­ness but no cer­tainty about how much of that will ac­tu­ally con­vert into sales. Un­like pre­vi­ously, the pipe­line busi­ness is now re­ally no pre­dic­tor of in­com­ing busi­ness, and sales now only go on the board once trans­fer goes through.

“West­ern Cape high­lights have been the sus­tained sales of prop­er­ties in the very top end, mainly on the At­lantic seaboard, to lo­cal and over­seas buy­ers. When in­ter­est rates were rel­a­tively high, the num­ber of dis­tressed sell­ers in­creases… De­vel­op­ment construction prices plum­meted, but this had lit­tle ef­fect on the abil­ity to de­velop due to the dif­fi­cul­ties with end-user fi­nance. Other trends in­cluded a short­age of school­ing, which pre­vents peo­ple buy­ing in some ar­eas, with the south­ern sub­urbs an ex­am­ple.

“In the Boland and Over­berg, de­spite the dif­fi­cult trad­ing con­di­tions, the re­gion has per­formed very well and man­aged to ex­ceed its sales turnover bud­get for the year, with Stel­len­bosch and Som­er­set West in par­tic­u­lar the star achiev­ers. How­ever, the coastal ar­eas – where a large per­cent­age of prop­er­ties are sec­ond homes – were most af­fected by the eco­nomic cli­mate.

“All in all, looking at 2010, there is cau­tious op­ti­mism that con­di­tions will slowly but steadily im­prove through the year. We ex­pect house prices to re­main flat for the first half of the year then to in­crease by be­tween five and 10 per­cent in the sec­ond half, with an ever-in­creas­ing tempo in sales ac­tiv­ity. This is seen against the usual back­drop of po­ten­tial South African is­sues – po­lit­i­cal and eco­nomic un­cer­tainty, the pro­posed Eskom tar­iff hike and con­comi­tant ef­fect on inflation, which may have a damp­en­ing ef­fect on this re­cov­ery.

“Nev­er­the­less, we re­main op­ti­mistic and en­thu­si­as­tic about the coun­try, about the res­i­den­tial prop­erty mar­ket and the com­pany. We be­lieve the busi­ness is well placed to cap­i­talise on the ini­tia­tives that were un­der­taken this year, and are looking for­ward to 2010,” said Gold­ing.

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