War of the Expert Opinions on Property
An article published on the IOL website has highlighted the clashing opinions of various experts and major players in the South African property industry. A “war of words” seems to have broken out between estate agents and bond originators, as pessimism increases subsequent to news that house price drops of between 10% and 40% are expected.
While there are some estate agents who insist that homeowners should not be “swept up in the panic”, there are others who are quite frank about the property market being in “serious trouble”.
The Cape Argus received an urgent email from Ooba (formerly Mortgage SA) on Monday, which stated that “recent alarmist forecasts by property market commentators” had resulted in “undue concern” for homeowners. They urged that homeowners resist being taken in by the “scaremongering” because the current downturn was only a “short-term situation”.
The initial unease started when Lew Geffen, head of Sotheby’s International Realty South Africa, sent a letter to his franchise owners predicting the pending crash would see a 40% decrease, adding that there were 60% fewer buyers in the market today compared to the same time last year.
While many industry players have lashed back and rejected these predictions, Maurice Levin, PR Manager for Sotheby’s has defended Geffen’s claims. “Lew is not afraid to pronounce that the industry is in a pickle. Many agency bosses talk it up because their livelihood depends on it,” Levin said.
Lee Gautschi, owner of Lee Gautschi Properties has said that she is “honestly” not experiencing panic selling in her market, although she did agree that a range of negative factors were having a dampening effect on the market. These factors included the National Credit Act, interest rate hikes and a “worldwide political trends of recession” that have impacted the local market.
Reports in the media have highlighted other negative factors affecting the market, including emigration spurred on by high crime rates, xenophobic attacks, the Eskom crisis, political dissent and corruption in South Africa’s ruling party.
The FNB Property Barometer indicates that emigration accounts for 12% of the total number of homeowners putting their properties on the market, while 21% comprises sellers downsizing due to financial pressure.
Andrew Golding, chief executive of the Pam Golding Property Group also tried to quell rumours of a property crash. “The reality is not as gloomy as portrayed in some of the commentary,” he insisted, adding that the middle class sector of the residential property market was characterized by an “under-supply and over-demand”.
However, sales director at Betterbond, Marsha Haupt had an opposite view, suggesting that right now, “there is more supply than demand”. According to a franchise agent who wished to remain anonymous, “If [Reserve Bank Governor] Tito Mboweni does increase the interest rate by another 2%, there will most certainly be panic selling in seven to nine months, whether that trend has begun or not”.
The estate agent said that many agents were also evaluating properties far beyond their scope so that they could secure a sole mandate for themselves. However, once the seller had signed on, the price began to fall and there were fewer and fewer people attending show days.
This reinforces what Geffen mentioned in his letter, as he said that attendances at show houses were generally poor and that “only when the agent has convinced the seller to use the most aggressive parameters, namely 40% below asking price, does the showhouse receive 10 couples or more leading to a subsequent sale”.
In fact, Geffen went even further and said that, “All the guns are loaded against us in this market and it will take your own courage and perspicuity in order to survive”.
The information in this article is courtesy of Tanya Farber (“SA property market in ‘serious trouble’”, IOL, 10 June 2008).
If you would like to buy or sell property in South Africa, please visit www.sahometraders.co.za.
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