National sales volumes edge up

Given the sustained vulnerability of the rand and economic setbacks, most notably the climbing petrol price and interest rate instability, it is perhaps a good time for a relook at where the market may be heading for the remainder of the year.

No dampening of buyer confidence

Seeff chairman, Samuel Seeff

"As we near the close of the first quarter, there seems to be no dampening of buyer confidence despite the economic and interest rate uncertainty, lowered growth forecast and inflation volatility," says Seeff. Activity remains high with show house attendance and buyer interest now at almost unprecedented levels.

"Looking at the deeds office data (Lightstone), sales volumes are edging up," he says. In 2009, volumes halved to about 20,000 transactions on average per month. By 2012, the average had edged up to around 23,600 and last year to around 24,500. While no fireworks yet, this is a 23% improvement since 2009.

Most notably, monthly volumes have gathered momentum month-on-month since the middle of last year at the rate of about 2,000 transactions on average when compared to the 2012 period. If that holds, we could end this year at about 10% up in terms of sales volumes and a bit closer to 27,000 per month. Seeff says, "Although this would still fall somewhat short of a monthly average of 30,000 needed to put the market into real upward gear, the upwards trajectory is highly encouraging."

"I just cannot see the market as overheating right now"

Responding to a recent press report in Forbes that has elicited debate around whether the South African economy and property market is a bubble waiting to burst, Seeff says this is highly speculative insofar as property is concerned. "I have been in real estate for almost thirty years and have seen the ups and downs. I just cannot see the market as overheating right now. Much of the oversupply of property has cleared out of the market and despite the pent up demand, there are simply no wholesale price hikes. There are still too many forces, not least of which the high household debt and constrained mortgage lending levels that still has a hold on the market preventing a massive jump in sales volumes needed as a precursor to industry-wide price hikes," he says.

While much has been made about South Africa's house price growth being at unsustainable levels in the early 2000s, an analysis done by housepricesouthafrica.com (based on Absa data) dispels this. It shows that in real terms, house prices are now actually only worth about 19% more than in 1983. "Current data from both FNB and ABSA points to current house price inflation of around 8% in nominal terms (2,33% after adjustment for inflation) although there are high demand areas where the average house price growth certainly tops this," he says. Prices though have firmed and if the pent up demand persists, we could see the gradual upward trend in prices gather momentum, but it is unlikely to reach unsustainable levels any time soon.

Now's a good time to invest

While timing the market is difficult, now is undoubtedly a good time to invest in property. "The shortening days on the market (now around 15 weeks nationally although it is much less in the high demand areas), buoyant demand and shrinking property inventory also point to this period as a good phase for sellers," says Seeff. Most of those that needed to sell have now sold and this paves the way for new listings and product to come into the market.

"We have certainly seen an emergence from the depressed sales levels of three to five years ago and are now in a stable phase poised for a rebound," he says. We will need to watch the economy and interest rates in particular carefully though. Hopefully, once the dust settles after the election some of the UK, European and US economic recovery can spill over into the emerging markets and provide a kick start to our domestic economy. For now though, the housing market is on a firm foundation and we expect it to continue its gains throughout this year.