Market has adapted to tough times
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.