By Dr Andrew Golding, CE Of The Pam Golding Property Group
The state of the property market tends never to be static and this year (2013) has been no different with a number of new emerging trends. The first and probably most significant of these is the fairly rapid change from stock over-supply to stock shortages. At first evident in only a few areas within suburbs, but now widespread across all of the major metropolitan centres of the country, this trend began to emerge at the end of last year (2012), but really only developed fully in the past six months.
The question is whether these stock shortages are a precursor, as they normally are, to a new phase of real house price growth. There are a number of reasons why one could believe so – historically low interest rates, some pent-up housing demand generally in the system and perhaps most importantly, some renewed vigour and appetite for mortgage lending by the major banks. However, counteracting this view is the still fragile state of the economy, the relatively high levels of consumer indebtedness and the fact that from a political perspective there is a general election looming. Nevertheless we remain cautiously optimistic that we will in fact see some real, albeit modest, house price growth next year (2014), for the first time since 2008.
Looking back at the housing market performance over the past 12 months we have seen a market which has performed pretty much in line with expectations, characterised by slow and steady improvement. According to Lightstone’s analysis, house prices nationally have seen an average seven percent year on year growth to September 2013, with a CPI rate of six percent.
Sectional title price growth overtook freehold in March this year (2013) and has enjoyed a stronger growth rate over the period since then, with sectional title growth standing at 7.7 percent year on year and freehold six percent. Interestingly, coastal properties slightly outperformed non-coastal properties at 6.7 percent versus six percent year on year, while the low end affordable market continued to perform really well with double digit growth rates throughout the year.
As far as our PGP sales are concerned, we have had a most satisfactory year. To date sales value (in rands) are up by 21 percent year on year, while our sales volumes (units) have increased by 15 percent over 2012. Currently PGP’s average selling price for 2013 is R1.823 million, up from R1.736 million in 2012 – this versus a national average for the industry of about R900 000.
Within the Pam Golding sales environment, the greatest demand for homes across the various price sectors is by far that between R500 000 and R2 million, accounting for 34 percent of the total in rand terms and growing by nine percent. Over and above this, there has been a notable increase of 37 percent in PGP’s sales activity in the price ranges from R3 million to R5 million, a somewhat more modest increase of 10 percent in the price band from R5 million to R10 million, and a marked increase of 60 percent in the top end of the market from R10 million upwards – the latter due to the fact that this high net worth sector was by and large able to sit out the economic recession.
Some noteworthy high end sales by PGP during the calendar year to date included the sale of a R110 million home in Fresnaye; a luxury penthouse apartment in Bantry Bay sold for R34.5 million – the highest price achieved for a sectional title unit in this suburb in the past five years; an apartment in Melrose Arch in Gauteng which sold for R24.561 million; and a house in Knysna on the Garden Route which sold for R23 million, among numerous other sales in excess of R20 million for residences on the Cape’s Atlantic Seaboard and Boland region.
Speaking of high net worth buyers and re-emerging trends, while sales to international buyers are only a tiny fraction (less than one percent) of total sales annually across the market, we have noticed a return of the international buyer to the market. Our sales to overseas buyers still remain a very small percentage of total group sales (3.54 percent in terms of volume ie units) but the extent of South Africa’s global appeal is evident in the spread of over 45 countries from around the globe which are represented among our international buyers.
In a report recently produced by Candy & Candy, Savills World Research and Deutsche Asset & Wealth Management which identified the top 20 prime leisure locations where the global super wealthy are purchasing additional properties, the Cape Winelands is emerging as a luxury second home destination, thus joining the likes of the Côte D’Azur, Costa Esmeralda in Italy, Aspen in USA, Monaco, Maldives, Palm Beach in USA and Venice in Italy.
While it is difficult to compare like with like, there is no doubt that South Africa offers high net worth buyers some world class options representing sound value for money. A R30 million Clifton home could be comparable with a €20 million home in St Tropez in the south of France, while a modern, trendy apartment in Melrose Arch in Johannesburg priced at R4 million could compare favourably with a similar type, studio apartment in New York which would set you back $2 million.
Live, Work, Play
Returning home to South Africa, other trends which have either evolved or simply continued include the move towards owning a home which offers both a desirable lifestyle and is within easy reach of transport hubs such as the Gautrain and/or bus routes. Vibrant, revitalised nodes or brand new nodes are gaining in popularity such as Melrose Arch in Johannesburg, Gateway in uMhlanga, KwaZulu-Natal, Maboneng Precinct in Johannesburg and Cape Town’s central city and Woodstock inner city regeneration nodes.
A strong contributory factor to market activity here is the continually growing black middle class sector. This is evident, for example, in Maboneng Precinct in Johannesburg, which offers a unique residential lifestyle in the city which resembles that of an urban city dweller in any of the top international cities of the world such as New York or London. This lifestyle is popular with the youth of ‘Jozi’ from all communities who wish to engage with the city.
Maboneng Precinct is one of the most sustainable and ambitious private development initiatives taking place in the Johannesburg city centre today, encouraging impressive economic growth and social cohesion in the area and growing at a phenomenal rate. We are delighted to be involved in this visionary project, where we already have a PGP on site office. At Melrose Arch, where 49 units have been sold at a total value of R286 million, phase four is currently in design.
The leisure market appears to be adjusting to market conditions and while there is still an over-supply of stock this sector of the market appears to be seeing the start of a slow recovery. For coastal buyers, areas such as Knysna, Plettenberg Bay and St Francis Bay offer sound value for money and high lifestyle appeal. The Karoo and Kalahari, with their picturesque and historic towns and architecture, remain popular among those seeking a more leisurely, country or rural lifestyle or to simply get away from it all.
Several important and potentially far-reaching industry issues continue to occupy the minds of all property companies. In this regard we welcome the permanent appointment of Brian Chaplog as CEO of the Institute of Estate Agents Affairs Board as a positive move, as he has already demonstrated an inclusive approach in engaging with all agents around the country as well as demonstrating a passionate commitment to the industry.
The challenge now is to adequately address the question of transformation of the industry in a way which addresses the fundamental issue but at the same time offers a workable and practical solution. In this regard we have pledged our support to the intern programme of one intern per office. If this becomes an industry wide practice there is the potential for more than 5000 new interns per year, which would make a significant impact on transforming the industry.
The year ahead
PGP’s core focus has been – and continues to be – to make a significant investment in our agents and staff via training to ensure that they remain at the forefront of the real estate industry. Through a range of integrated media solutions, including both electronic/digital and print, we are equipping them with tailor-made IT and other technological platforms and innovations to enable them to offer our buyers and sellers a valuable differentiated service, which includes providing them with up to the minute, relevant market related information and communications regarding their property transactions. Fundamentally, we believe that the value which our clients – in this case, sellers – achieve on their properties is directly determined by the service that they receive. So it is through the entire engagement of a mandate – which can be for a period of several months – that we are looking to equip our agents to add value.
In the year ahead we will accordingly invest in technological advances such as these, and in training and marketing to the tune of a total of R30 million. This will include continued investment in our proprietary CRM (customer relationship management) platform, ‘Alchemy’, which provides our agents a unique engagement platform to develop valuable relationships with their clients. We are still the only real estate company in South Africa offering augmented reality technology to our clients – which provides for easily accessible video presentations of our properties. Furthermore, the PGP website receives in excess of 300 000 visits per month with unique visitors up by about 16 percent and our mobi traffic up by 40 percent year on year in line with the global trend to mobile – anywhere, anything, anytime. Interestingly, we receive in excess of 2000 international visitors to our website every day.
In terms of training and the new qualifications, all existing PGP agents have already met the requirements of the NQF4 qualification while our principals have all qualified in terms of the NQF5 standard. As far as new agents or interns who entered the industry since 2008 are concerned, we have just launched our own Selling Skills Programme which is custom-designed by our Training Academy for PGP agents and which prepares them to write the NQF4 qualification and teaches them our unique brand of sales and marketing.
As far as operations next year are concerned and while the trading conditions in the market remain challenging we do feel the property market has entered a new and more positive phase, including the ongoing re-entry of developers into the marketplace. We are optimistic that these improving activity levels will be sustainable and mark the beginning of another cycle of positive house price growth. Based on current sales PGP is pleased to report that we are currently on track to achieve sales turnover of R14 billion for our financial year ended February 2014, which will represent an increase of 15 percent on the previous year. We also remain extremely bullish regarding Africa, where there is a strong housing demand and we are further extending our reach with plans well under way to launch a PGP presence in Uganda and Nigeria.
PGP expansion in Africa
In Goodluck Jonathan City in Abuja, Nigeria, we are in the final stages of negotiation with the federal bank of Nigeria to market and sell a huge new housing estate, with the first phase comprising 100 000 units, as well as a new residential golf estate in Uganda, which will provide us with a further springboard into Africa. Strategically Africa presents us with considerable growth opportunities, and our key for success is to enter into partnerships with local operators who have the required knowledge in terms of not only the property market but also the legal requirements of transacting in those countries. We also see opportunities for further growth and expansion in countries where we have existing offices, such as Namibia, Zambia, Kenya, Botswana and Zimbabwe.
Acquire residency in Spain
Looking to our own international products which PGP markets both locally and globally in countries abroad, such as London, Eden Island in Seychelles and Mauritius, it is significant that Spain has now promulgated legislation which will grant automatic Spanish residency to non-European Union citizens who invest €500 000 in property. A key attraction for South Africans in particular is that investors will have unrestricted access to move within the Schengen zone. Our International & Projects Division has formed an association with an experienced and reputable local company who will provide our buyers with a broad range of new and existing homes concentrated mainly in Barcelona and Costa Brava as well as the islands of Mallorca and Ibiza. With a number of new residential developments in the pipeline, the first new development we are launching to the South African market – in conjunction with Savills – is the White Angel in Ibiza which has an entry level price of just under €400 000 to €700 000. Brand new and built to high specifications this is an ideal buy to let investment as it is well equipped for holiday use and for letting for three to four months of the year to those who vacation in Ibiza. It offers sound rental returns merely from those four peak months of the year.
London remains a premier destination for South Africans, particularly among those who are investment-driven, and this month, together with London property experts from Savills , we are bringing to the market in a series of road shows a range of residential apartments and townhouses in Greater London in the most popular price range from just GBP295 000. At the now well-established Eden Island in Seychelles 440 units have been sold and we are down to the last 20 percent or 130 units available for purchase, comprising a mix of villas, maisons and apartments priced from $425 000. In Mauritius, at the recently launched Le Parc du Mont Choisy near Grand Baie we have already sold 45 units at an average price of $1 million, while at Amalthea at Anahita resort in Mauritius, interest is running high in this well-priced development where homes can be acquired for less than $600 000 dollars.
Finally, we are delighted to announce that PGP has recently been awarded Best Real Estate Agency South Africa and Best Real Estate Agency Africa for 2013 at the International Property Awards banquet in Dubai. We will also soon launch of our own new lifestyle magazine, ‘Imagine’ which is a distinctive, high quality, luxury title featuring trends from around the world, interviews with interesting and inspiring people about their dreams and property aspirations, insights into property investment and a peek into well-known South African’s homes. Owning property is all about dreams and imagination and Imagine brings these to life. With the first issue to be published in January 2014, this publication will be bagged and distributed with Visi magazine as part of our media partnership with them.