Slow and steady improvement could see SA’s residential sector preparing to overtake five years of inhibited growth.
Market leaders say the way forward for this sector remains heavily dependent on both institutional and industry support. Real growth at all levels requires all-round cooperation to achieve sound legislation, high levels of service excellence, and industry transformation.
Forward movement in this sector was illustrated by Lightstone’s annual analysis of national house prices. The report showed average growth of 7% year on year growth to September 2013, with a CPI rate of 6%. John Loos, FNB Household and Consumer Sector Strategist, says this growth rate close to consumer price inflation at just above 6%, translates into very stable house price levels in real terms.
Industry remains cautiously optimistic that there will be real house price growth in 2014. Although marginal, they say it will take place amid a fragile economy, high levels of consumer indebtedness, and political uncertainty in view of upcoming elections. Andrew Golding of Pam Golding Properties (PGP) says this year’s performance that was in line with expectations, saw widespread stock shortages which may be a precursor to real growth for the first time since 2008. PGP reported a 21% increase in sales value, and a 15% increase in sales volumes for the year to September.
“The market has much to be upbeat about,” says Samuel Seeff, Chairman of Seeff Properties who reported a 20% year on year increase in turnover for the year, and best performance in almost 50 years. He says activity in the primary urban areas has strengthened notably this year and is now at the healthiest levels since 2009. “While still too early to talk about a major recovery, especially in view of the wider economic landscape, we are moving in the right direction and there is now more balance in the market.”
Herschel Jawitz of Jawitz Properties says, the market will continue to see healthy buyers in 2014 despite the economic concerns of 2013 of low consumer confidence and high debt levels. He foresees stock shortages to continue in major metro areas of Gauteng, Durban and Cape Town, with gradual price growth expected to be around 5 – 6% in 2014, while holding high hope for real price growth over and above inflation by 2015.
Varying growth patterns are seen within SA’s residential sector, which in 2012 was valued by the Property Sector Charter Council at about R3 trillion, and to officially represent houses, community schemes, and land zoned for development. In August this year Absa reported average nominal house values to be R741 100 for small, R1 074 400 medium, and R1 698 000 for large houses, all of which fall either within the free standing, apartment and sectional title, or private estate categories, nationally.
Market indicators, according to new emerging trends point to stock shortages in prime metropolitan nodes, as well as increased demand for sectional title units. The FNB Estate Agents Property Barometer Quarter 3 of 2013 stated levels of demand, combined with a low level of new residential development, have been sufficient to cause mounting stock constraints. Loos said: “We saw a mild increase in the percentage of agents citing stock constraints as a factor influencing their near term expectations, from 12.7% in the previous quarter to 15%.”
High price growth in central nodes due to strong demand is seen nationally in metropolitan areas, with double-digit growth in the affordable sector, and coastal properties marginally outperforming non-coastal. Increased demand for sectional title properties as opposed to freehold is seeing year on year sectional title growth, currently at 7.7% compared with freehold at 6%, says Golding.
However, industry leaders say while shifting consumer trends may bring fiscal growth, industry transformation remains vital to real growth. This can only be achieved through increased representation of black professionals in the industry.
“It is an economic imperative that transformation in this sector takes place through co-operative efforts between industry and other key stakeholders mandated around skills development,” says Jawitz. He says the industry has a lot to look forward to with the newly formed industry representative Real Estate Business Organisation of South Africa (Rebosa) headed by CEO Roy Leigh, and Bryan Chaplog now heading up the Estate Agents Affairs Board.
“While the industry continues to independently raise standards of qualifications through the EAAB and Services Seta, a more sustainable solution is needed to overcome the challenge of bringing more black people to this profession,” says Seeff. One of the biggest problems facing the industry is high levels of barriers to entry. This is due to the delayed commission-based income of new entrants, mostly earned only about six months after training and practical experience.
About the vital components of industry transformation, Golding says: “Specific attention paid to the Property Transformation Charter will help achieve workable and practical future solutions, such as the planned one intern per office programme which offers potential for more than 5 000 new interns entering the industry per year.”
Plans are afoot for black applicants with matric or degrees to receive practical in-house training by real estate agents. Although the EAAB’s Chaplog wasn’t available for comment, major industry players including Tony Clarke of Rawson Properties, say they will be jointly participating in this new transformation solution.
Golding says this initiative bodes well for long-term growth and industry sustainability.
*Anna-Marie Smith is a freelance property writer in the commercial, industrial and residential sectors.