26 Aug 2010
Happily, the rate of decline in sales volume is slowing after the sharp declines we saw during the recent recession. We have seen the return of year-on-year house price inflation- good news for home owners and financial institutions. However, recovery is much slower in non-primary sales which include buy-to-let sales and leisure market sales. South Africans continue to have a high debt-to-disposable ratio of 78,9% hampering affordability and making access to home-finance challenging. Many cash-strapped consumers have joined the throngs of those downscaling for financial reasons. We focus our attention on the R300, 000 to R5, 000,000 bracket of residential properties, the most heavily traded segment in South African real-estate. In the year up to May 2010, the volume of full-title sales in South Africa declined by 3% whereas the total value of these sales increased by 3%.
Cash-buying has seen a significant increase. While 19% of full title houses and 25% of sectional title houses were bought cash back in the 2006-2007 period, the current period has seen this jump to 35% of full title houses and 43% of sectional title properties. However, these statistics must be considered in context. Cash buyers as a component of the buying pool have always been there. The contraction of the market, however, means that cash buyers now make up a larger percentage of the overall buying pool than previously was the case.
Factors affecting affordability: Ooba, South Africa?s largest mortgage lender, has seen 48.8% of their bond applications declined by a financial institution in June 2010. High deposits continue to be demanded. The average buyer of a R1,000,000 home in South Africa would have to have at least R200,000 available in savings for a deposit, transfer fees, and other costs associated with the purchase.
The average price of a full-title house is currently R1,029,168, an increase of 6% y/y. The average price of a sectional-title dwelling is R787, 812, an increase of 5% y/y. Tepid growth in sales is expected to continue in the medium term due in part to the lack of saving ability of South African consumers.
Another trend is the changing face of the buyers? race profile in South Africa. In the past, the inequalities of the apartheid policies meant that predominantly white people were active in the property market. Now that gap is closing, an encouraging trend more representative of the South African population.
In 2005 60% of home buyers were white, 22% were black, 7% were coloured, and 11% were Asian. Fast-forward to 2010, where we see a shift. Only 44% of home buyers are white, 34% are black, 8% are coloured, and 14% are Asian. It is expected that in coming years white buyers will dwindle to around 20%.
In conclusion, the good news is that the first quarter 2010, Knight Frank Global House Price Index revealed that South Africa has moved up, from position 11 to 6 out of 47 countries in the world.
We believe that while the worst is over, the real-estate market will remain pedestrian and growth will follow a rather flat trajectory in the next 24 months. Growth in 2010 is forecast at 8,5% slowing to 6,5% in 2011. SAPTG does not expect the return of a sellers? market before 2013.
SA's Top 10 Suburbs Top 10 suburbs are based on Total Number of Sales for the period 1 February 2010 to 30 April 2010. We review full title and sectional title properties collectively and exclude sales where purchase price is less than R100k or greater than R15mil.
PROVINCE TOWN / AREA SUBURB SALES TOTAL VALUE AVG. VALUE GAUTENG ROODEPOORT WELTEVREDEN PARK 77 R67,319,000 R874,272 FREE STATE BLOEMFONTEIN LANGENHOVEN PARK 76 R62,557,500 R823,125 GAUTENG ALBERTON MEYERSDAL 76 R86,980,600 R1,144,481 GAUTENG SOWETO PROTEA GLEN 76 R19,364,709 R254,798 WESTERN CAPE MILNERTON PARKLANDS 76 R60,290,000 R793,289 GAUTENG CENTURION MIDSTREAM ESTATE 74 R110,592,000 R1,494,486 WESTERN CAPE MILNERTON TABLE VIEW 65 R65,320,308 R1,004,927 WESTERN CAPE CAPE TOWN PLUMSTEAD 63 R64,288,557 R1,020,453 GAUTENG PRETORIA FAERIE GLEN 62 R69,332,500 R1,118,266 GAUTENG PRETORIA MORELETA PARK 57 R61,065,000 R1,071,315