SA Property Transfer Guide Paints a Positive Picture

Not All Doom and Gloom

The South African property market may be experiencing difficult times, but data released by the South African Property Transfer Guide (SAPTG) indicates that the situation is not quite as dim as some of the latest media reports might suggest. This is according to SAPTG National Training Manager, Dieter Deppisch, whose comments were recorded in an article published by iafrica.

Deppisch says, “It’s not all ‘doom and gloom’ across the entire real estate sector. While certain segments within specific areas in South Africa have experienced a fall in prices, there is reason to believe that trading conditions will become bullish in the short-term”. He acknowledges that the residential property market in general is experiencing a sharp downturn, but Deppisch argues that this is a perfectly natural part of the cycle. “The industry is going through what economists call a ‘correction in the marketplace’,” he explains.

The data available through SAPTG’s advanced online property reports has informed Deppisch’s insistence that it is primarily the middle segment of the residential market that is feeling the worst effects of the current downturn. “SAPTG data paints an accurate picture of what is happening nationally, regionally and all the way down to street level,” he says. “The lower economic end of the market is actually experiencing growth in both value and volume of sales. Similarly, there has also been a healthy increase in the value of sales at the very top end of the market, whilst this has been tempered by a decrease in volume in most areas”.

In his illustration of conditions at the lower end of the market, Deppisch uses the example of Gauteng’s Protea Glen. “If we compare the first seven months of 2007 with the same period this year, our data indicates that the suburb has experienced excellent growth,” he argues. “Excluding transfers valued at R100 000 or below, which may typically include RDP housing and deceased estates, the volume of transfers is up from 517 last year to 548 this year”.

In fact, the average house price in Protea Glen has risen by a healthy 19%, from R239 328 in 2007 to R285 000 this year. “The data clearly shows that this large suburb hasn’t been hit by the real estate recession and is, in fact, still experiencing healthy growth,” says Deppisch. This suburb falls into the Bond Battalions category in Clusterplus, Knowledge Factory’s reputable geo-demographic segmentation tool, which denotes this category as having suburbs made up largely of young parents weighed down by their families, bonds, rates and taxes, as well as the maintenance of a second hand family car.

The SAPTG data also reveals that some suburbs in the higher end of the market are also doing well. The Upper Crust and Pearl Strings categories of Clusterplus typically feature large homes with immaculate gardens, swimming pools and tennis courts, in leafy, older neighbourhoods. These have experienced a decrease in transfer volumes since last year, but not in value.

Examples include the Johannesburg suburbs of Sandown and Bryanston, where “Sandown has seen average transfer values increase by 17.2%, while the volume of sales has dropped by 28%. Similarly, average values have increased by a vigorous 31.2% in Bryanston, even though the suburb has experienced a 10.5% drop in the volume of sales,” says Deppisch.

When it comes to an indication of healthy growth in the top end of the market, there is one suburb in particular that stands out. Also in Gauteng, Sandhurst has reflected an amazing 49.1% increase in average transfer values and only a 10% drop in volume. Deppisch explains that buyers at the high end of the market are not typically affected by the tight lending criteria of the National Credit Act and include both local and foreign cash buyers.

With 15 years of comprehensive transfer information available through the SAPTG to back up his stance, Deppisch disagrees with the pessimistic claims made by various property analysts that property values have plummeted across the board. “What is true is that there are areas in the country where prices have fallen by 30 to 40% and even more,” he notes, “but the fall in property value has been largely confined to the middle sector of the residential market. In addition, it should be noted that at times the perceived ‘decrease’ is artificial, reflecting the difference between a seller’s unrealistic wish-price and actual market value or the difference between a ‘sellers cycle’ price compared with prices in the ‘buyers cycle’. At times, even estate agents are to blame since some offer an unrealistically inflated value to a prospective seller simply to acquire a sole mandate”.

Deppisch clarifies the middle segment as consisting of properties between 140m² and 220m² that have an average transfer value of R967 000 and admits that it has been “hit pretty hard”, with volumes down by as much as 35% nationally and real growth slightly below CPIX inflation calculated year on year. Despite this, he remains adamant that the future still looks promising, even for this segment of the market.

“There is light at the end of the tunnel, even for the middle segment,” he asserts. “Most analysts agree that inflation will peak by the first quarter of next year and that the first rate cuts can be expected before the end of 2009. What this means is that the current correction could well be over within 18 months and we will begin the cyclical shift from a buyers’ to a sellers’ market again”.

The information in this article is courtesy of Property iafrica (“Some boom amidst gloom”, 27 August 2008).

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