2 Sep 2010
Lightstone is one of those sites that has become indispensable to anyone in the property game - from journos looking for stats on a particular owner of a property to estate agents preparing a comparative market analysis (CMA) to investors looking for trends in any particular suburb or area.
Lightstone is a specialized GIS, IT and knowledge management company. Initially focused on the mortgage industry - it still provides valuable valuation technology and other risk management services to most South African mortgage lenders. Taking all this into account, it goes without saying that MD and founder, Anthony Miller has strong opinions on local property markets, opinions based on mounds of empirical property data. Miller does seem to have his finger on the pulse of the SA property market, so what does he say about the current state of the residential market in South Africa? Quite a bit actually - he was speaking at the recent Rode Property Conference, held at Spier Wine Estate in Stellenbosch. "The market has improved substantially over the last 12 months." Was Miller's opening statement," but the market is still good for bargain hunters." The big thing happening in the market is that the affordable housing market is substantially outperforming other markets as many people are trading down. Many investors and homeowners are selling their more expensive bonded homes, with some excess equity, and buying cheaper houses for cash or substantially reduced bonds. According to statistics transfer volumes have come down substantially over the last four years but transfer values have remained pretty constant. There is still a great deal of distress in the market but opportunities abound for investors. He said that in the affordable housing market prices have grown 14% year on year, with other segments growing by 7-9%, noting that great value has been created in the affordable market. The drop in the trading volume is mostly in the bonded component with cash volumes remaining constant. Having said this he also said that the secured golf estate market is also growing faster than others sectors. He noted that Sales in Execution (SIE) are reaching record highs since 2000, although banks are trying hard to assist distressed homeowners, with any other mechanism being preferable to SIE. "There is a lot of creative work being done by banks to avoid SIE, preferring to weather the storm and try keep people in homes." He said that 30% of SIE notices result in a forced sale, this number was at 9% in the year 2000 and 23% in 2005. Properties in possession (pips) are below historical highs and auction clearance sales are reaching record levels. He said that the impact on industry players has been huge with a "significant reduction in the number of agents and property companies operating." This of course affects both lenders and conveyances and other related industries, with a particularly strong impact on mortgage lenders, who are suffering unprecedented losses caused by bad debts. It's not all doom and gloom though, "with all thing being considered we are still seen quite a high level of lending, better than much of Europe." Miller thinks "things are starting to turn and that we have seen the worst of it" Other property players at the conference were not so sure - but one thing all agreed on - cash is king right now and there are lots of opportunities out there if you have some.