Property market shows slow but steady growth - Korbitec
The South African property market has continued to show slow but meaningful growth despite a difficult post-debt crisis environment, in which the threat of a double-dip recession still remains a very real possibility. Key indicators suggest that confidence is gradually returning to the market and that a slow road to recovery is imminent.
"Since the market low point in August 2009, we have seen a small but steady growth in property transaction volumes," says Dawie Verryne, CEO of Korbitec. "Volumes are now 15% to 20% higher than they were during that period and six of the first nine months of 2011 have recorded higher transaction levels than in the equivalent period last year."
Whilst the growth rate has been relatively slow, it has been definitive with no real indication of any significant decline and with many of the country's banks having relaxed their mortgage lending criteria, confidence is gradually starting to return.
Market is dictated by banks
"The strength of the market will ultimately be dictated by South Africa's banking institutions, whose increased confidence is likely to cause a knock-on effect for consumers," continues Verryne. "Many of the banks have relaxed their mortgage lending criteria this year and are allocating increased budget to marketing home loan and mortgage offerings, which serves as a very encouraging sign."
Whilst the property market remains fairly stagnant, significant new buyer trends have begun to emerge with a number of prospective homeowners finding creative ways to put themselves on the property ladder.
"Property has traditionally been regarded as an investment made by married couples or high impact investors, but we've started to see an increasing number of property purchases being made by multiple buyers," explains Verryne. "Debt issues and strict lending criteria have made investments such as property largely inaccessible for individuals and the fairly steady property price has resulted in more buyers pooling funds in order to become homeowners."
Poor returns for investors
South African property prices have increased by 5% to 7% over the past year, a slightly misleading figure that in fact represents very little growth in real terms. "Taking inflation rates into account, the rise in property price equates to somewhere between zero and 2%," says Verryne. "This represents poor returns for investors, but it's encouraging to note that, unlike in some EU countries and the USA, we've seen no sign of a price decline."
"Interest rate hikes do present some concern but, provided that inflation remains under control, we're unlikely to see any significant hike before 2013," says Verryne. "Market fluctuations are of course a reality, but based on the property sector's performance over the past year, it's probable that we'll see a steady, incremental recovery, with the market likely to return to the peak levels within the next three to four years."
