The New Normal

 

In spite of a sluggish economy, political uncertainty and rising cost pressures on households, a tribute to the resilience of our property market is that activity – certainly from a Pam Golding Properties perspective – is steady, with some areas seemingly recession proof. We are even experiencing stock shortages in increasing numbers.
In effect, the residential property market appears to have settled into a “new normal”, containing a surprising number of positives which currently make up our market.

 

Sound buying opportunities are available in a wide span of regions. For investors taking a medium to long term view of the market this is a good time to acquire property. This holds true for potential purchasers of family homes and for, especially, first time buyers. The key to investing remains the same – buy when the market is low. But unfortunately, “the bell doesn’t ring” – one can hold on for too long trying to call the bottom of any market.

Distressed sales and bank repossessed properties continue to be a desirable option for most savvy first-time owners and investors. Discounted prices on these properties, together with 100% bonds and low attorney’s fees, are some of the main benefits. From August this year, and since joining Absa’s Help U Sell programme, there has been a 35% increase in the number of sole mandates being awarded to PGP in this sector of the market, resulting in a 24% rise in the group’s distressed property sales.

For both buyers and sellers there are serious guidelines to follow. Only those properties which are correctly and realistically pegged at market related prices are selling, and serious sellers are realising that this situation is likely to continue into the foreseeable future. Buyers on the other hand must have good credit ratings and sufficient funds for a sizeable deposit in order to obtain finance. Although banks have relaxed their criteria somewhat, lending will seemingly remain tight for some time to come.

From a Pam Golding Properties viewpoint nationally, we continue to see the highest number of sales in the R800 000 to R3 million bracket, with sales steady in the R6 million to R12 million range. The group continues to have success in the high end, luxury market, with top prices recently achieved in the R20 million to R30 million price range – in Cape Town’s Atlantic Seaboard and Southern Suburbs.

In the Cape Town metropolitan area, while volumes remain low compared with the boom years, there are sales which continue to buck national trends.

The increasingly important rental market has had a busy winter season, with over 470 residential leases concluded or renewed during the period May–August. Furthermore, there have been particularly high levels of activity at the top end of the rentals market.

It is encouraging to see residential property in the Johannesburg city centre experiencing a strong revival, reflecting increased investor confidence as the urban renewal effort takes effect and occupancy rates increase. The Gautrain’s new Park Station and Metrobus depot in Ghandi Square ensures that the CBD is on all commuter routes.
The CBD has also seen the renovation of older buildings, some of which have been converted into modern New York-style apartments which are particularly attractive to those working in the city centre. More traditionally, PGP remains active in Johannesburg’s northern suburbs with strong demand in the R1 million to R5 million bracket.
The group’s Hyde Park developments team based at Melrose Arch achieved R350 million in sales during the past 12 months and has taken on new development stock worth close to R1 billion.

PGP has doubled its coverage in the Pretoria region and a number of areas are showing pleasing signs of recovery. Properties in the R1 million to R2 million are in greatest demand, but we have also experienced activity in the top end of the market in areas such as Waterkloof, Waterkloof Ridge and Brooklyn, which are among the most exclusive residential suburbs.

Nationally, the affordable market is, understandably, doing well. Deeds Office data suggest that as many as 30%-40% of all transfers are taking place in the affordable, BNG (breaking new ground) and social housing arena.
Internationally, prime central London sales remain profitable for South African investors. The London market continues to confound the critics, with impressive growth in terms of capital values and rental yields. According to the UK Land Registry, over the past year the annual rise in residential property prices averaged 5,5%. Rental yields of 6% are common, while PGP has experienced rental growth in excess of 7% in South West London.
Currently PGP is marketing opportunities to acquire prime located property in London priced from 300 000 sterling upwards.

The international division has achieved considerable success in the Indian Ocean islands of Mauritius and Seychelles. We have sold 400 units in the 56 hectare Seychelles resort of Eden Island at a combined value of approximately R2,9 billion.

In Mauritius, to date PGP has sold 302 units in various developments at a total value of approximately US$ 230 million. Homes in Mauritius continue to hold high appeal for the South African market.
North of our borders, the group has offices in Zambia, Botswana, Kenya, Namibia, Swaziland and Zimbabwe. In Namibia, we have recently concluded a partnership with offices in Windhoek and, shortly, Swakopmund. PGP will continue to seek partners in East and West Africa, including possibilities in Tanzania and Angola. We remain bullish about prospects in Africa as a whole.

On the home front we have the “new normal”, to which the residential property market is adjusting.
The positive aspect is that bottom of the slump is well behind us and the market is reviving. Most market analysts forecast growth in the coming year with which we concur; no fireworks, but steady progress.

Source: Dr Andrew Golding, CE of the Pam Golding Property group
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