New Rules When it Comes to Property

Property Game Has Changed

There is no doubt that this year will be put down as one of the most shocking in South African property market history, with the army of estate agents shrinking unbelievably and panicking sellers struggling to offload properties.

Add to the mix the recent financial crisis in the US, Eskom’s incompetence and the political turmoil set in motion with Mbeki’s dismissal by the ANC, the nation has had a lot of drama to deal with this year. Even so, the news isn’t all bad.

Survival of the fittest applies:
When it comes to estate agents, the order-takers can’t cope and are leaving the market in droves. That means that buyers and sellers should be left with a much more competent group of real estate specialists who know the value of hard work. Dr Piet Botha, chairman of Nationlink said, “When the market was hot and homes were selling before they even reached the market, you didn’t need to worry about getting the best agent – just the cheapest”. Now you need a top salesperson. He advises, “Interview agents rigorously and insist that they present you with proof of their recent successes and a well-conceived marketing plan that goes way beyond the usual internet listing, one or two show days and a tiny weekly advert”.

There is more money to be made for the survivors:
Considering that the pool of estate agents is smaller, this should translate into more money because there will be more stock shared amongst fewer players. Also, some of the more savvy operators are offering their agents bonuses if the home is sold within 30 days or at the asking price, which is a clever way to motivate agents into selling your home first (Nationlink).

Tough times call for financial savvy in order to survive:
Interest rates have given consumers quite a beating this year and they show no sign of easing just yet. This means that it’s a good idea for property owners to tighten their belts and keep cash available for emergencies. We seem to have entered an era of “goodbye bling, hello thrift”, which is a trend that has been seen internationally. It seems that the “buy now, pay later” mindset is over and this “means no more conspicuous consumption, at least for a year or two. Instead we have conspicuous carefulness,” according to a personal finance advice site (fool.co.uk). The latest trend will be bragging about bargains rather than big brands.

Renting is hip:
It seems that it is no longer “in” to be a property buyer, as renting is looking increasingly more attractive. Lanice Steward, managing director of Anne Porter Knight Frank, says her agents “come across young, upwardly mobile people who tell [them] that they prefer to rent at discount rates in a good area rather than compromise with a less attractive home in a not-so-fashionable suburb”.

Steward goes on to say that this philosophy is “short-sighted”, as it is popular with “yuppies who earn good salaries, drive expensive cars and believe that they have what it takes to ‘make it’ in today’s commercial world – but the day will come when they rue their decision”.

“They will find themselves without a home of their own and condemned to annual rent increases in perpetuity,” argues Steward. When it comes to buying homes, those who scrimp and save to put a deposit together, buy a home and then work on it will see that every five to seven years they are able to upgrade at very little extra cost, indicates Steward.

Speculators find new hobbies:
There are many speculators who seem to have left the market; especially those who saw residential property as a get rich quick scheme and have now had their fingers burned. With property losing popularity as an investment option, investors who do stay in the market are likely to make more money in the long run. That is assuming that less stock will be built.

Developers are switching from residential to commercial:
With banks continuing to pull the plug on funding new residential projects, developers are moving their attention to commercial property. Nedbank’s move with La Residence in Sandton, which angered estate agents who had already attracted a number of quality buyers, is a prime example. The fact that FNB has announced it will withdraw funds for buyers in new developments means that in the long run, this should be good for residential property prices – rental and sales. The supply in certain areas has exceeded demand at times.

Predictions for the future:
The construction sector has been under exceeding pressure, but big developments are going ahead. This indicates that those with money to spend still see potential for their investments in South Africa. There are announcements almost every week with international investors boasting big property projects in the country. Local hoteliers like Sun International report excellent bookings for 2010 and the Fifa Confederations Cup in 2009 will bring even more visitors. The new President has also reassured the nation that economic growth and a successful 2010 World Cup are priorities, so things seem to be looking up for a brighter South African future.

The information in this article is courtesy of Jackie Cameron (“Property game’s ‘new rules’”, Realestateweb, 26 September 2008).

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