Know the Facts Behind the Property Market Crash

Latest Stats on Market Crash

Realestateweb has published yet another article detailing the grim situation still being experienced in the South African property market, this time revealing the latest figures from RE/MAX of Southern Africa, the biggest residential real estate sales group in the industry.

The figures provide telling insight into what has been happening in the residential property market this year. The statistics were compiled by RE/MAX of Southern Africa and BetterBond and reflect the residential property buying transactions and property market performance as compared to the same period in 2007.

Sales transactions: 2008 vs 2007

According to the stats, there has been a year-on-year decrease of 38% in the amount of property sales transactions nationally (across all price brackets) between January to July 2008, compared to the same period in 2007.

The total amount of properties under R499 000 sold this year is 36% less than the same time in 2007. Overall, the number of sales transactions has dropped by 42% year-on-year for properties priced between R500 000 and R749 000. There has been a decrease of 39% for properties in the R750 000 to R999 999 price bracket and a drop of 33% for properties valued at R1m to R1,499 999.

When it comes to the higher price brackets, the biggest decrease was recorded in the R1,5 to R2,5m price bracket, where the total properties sold so far this year is nearly 50% less than the same time last year. In sales of properties over the R2,5m mark, there has been a drop of 44%.

Most Active Price Brackets

In light of the total national transactions conducted by buyers and property investors between January and July this year, the most active property price bracket with figures recorded at 43% is that of R499 999 or less. This was followed by 25% for properties priced between R500 000 and R749 000, 15% for those priced between R750 000 and R999 999, 12% for homes in the R1m to R1,499 999 region, 4% for properties valued at R1,5m to R2,5m and 1% for homes priced anywhere above R2,5m.

Regional Stats

The total number of national sales transactions in the R499 999 or less price bracket in the months from January to July, the metropolitan regions recorded the following stats: 29% for Gauteng, Limpopo, Mpumalanga and North West; 22% for the Western Cape; 18% for KwaZulu Natal; 9% for the Eastern Cape and 2% for the Freestate. The remaining 20% refers to property sales in the non-metropolitan or rural areas across all nine provinces.

In the category regarding sales valued between R500 000 to R749 999: Gauteng, Limpopo, Mpumalanga and North West recorded the highest total of 41%, with KwaZulu Natal coming in behind on 20%, the Western Cape at 18%, 4% for the Eastern Cape and just 2% in the Freestate. 13% was recorded for sales activity that took place in the non-metropolitan and rural areas throughout the nine provinces.

When it comes to properties priced between R750 000 and R999 999: Gauteng, Limpopo, Mpumalanga and North West recorded the leading figure of 39%, followed by the Western Cape at 23%, 19% in KwaZulu Natal, the Eastern Cape at 6% and the Freestate tailing with 4%. The remaining 9% was recorded in the non-metropolitan and rural areas in the country’s nine provinces.

In the R1m to R1,499 999 price range, the highest percentage recorded was again in Gauteng, Limpopo, Mpumalanga and North West at 42%, with the Western Cape reaching 25%, KwaZulu Natal recording 17%, the Eastern Cape at 3% and the Freestate at just 1%. Sales in the non-metropolitan and rural areas came in at 12%.

The property price bracket between R1,5 and R2,5m had KwaZulu Natal in the lead taking 28% of all sales transactions, followed closely by the Western Cape on 27%, Gauteng, Limpopo, Mpumalanga and North West on 20%, the Eastern Cape fetching 4% and the Freestate again at 1%. The rest summed up to 14% of the total national sales activity.

The highest property price category of over R2,5m showed the Western Cape as having the largest amount of sales transactions at 36%, with KwaZulu Natal coming in second at 32%, Gauteng, Limpopo, Mpumalanga and North West with 20%, the Eastern Cape at 4% and the leftover in the non-metropolitan/rural areas in South Africa recording 8% of total sales.

There are signs of a slight market recovery in the near future and with the effect of higher interest rates, the acceleration of consumer inflation, as well as the strict lending criteria from all major financial institutions, this has highlighted that the single most important motivation for consumers is affordability and the ability to sustain their debt exposure.

The data discussed reflects a shift towards properties priced in the lower brackets, while premium properties in excess of R2,5m in the Western Cape remains in high demand across the country. During the course of August, RE/MAX of Southern Africa has noticed a definite revival in the property market, with many branches recording their highest number of property sales for any month this year.

There is one thing that comes out clearly in all of this, the way that lending institutions look at consumer risk and debt exposure has forever altered the landscape of the real estate market and both consumers, as well as agents need to learn how to adapt to the changing environment.

The information in this article is courtesy of Jeanne van Jarsveldt (“SA’s property market crash: grim new stats”, Realestateweb, 28 August 2008).

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