Against the backdrop of a year (2011) beset by both global and local challenges, the property market has continued its up and down performance in line with the past few years.
While the South African housing market experienced unprecedented growth over the past decade or more, despite this fact local residential property values did not experience nearly as sharp a decline as some other countries.
Over the past 10 years the South African housing market has delivered an average annual return of almost 23 percent, surpassing equity returns of just over 17 percent over 10 years. In comparison, bonds returned a little over 10 percent while the return on cash was nine percent. A comparison (by Coronation Fund Managers) shows global equity at just 2.3 percent and global bonds at 5.7 percent over the same period. And while the return outlook for local property over the next decade is likely to be less than that of the past 10 years, returns on local equity and bonds are also forecast to drop.
South African housing market
All in all the South African housing market has not fared badly – prices have probably dropped a total of 15 percent since the peak of the market and volumes are slowly but surely returning since 50 percent of the existing market disappeared when the market crashed (from a volume perspective) in 2007.
Today sentiment has improved; there is a growing acceptance among sellers for the need to price properties realistically in line with current market conditions, and buyers are continuing to place their confidence in solid, tangible real estate as a sound investment. There is also a pent-up demand among potential and aspiring home buyers, exacerbated by the continued restricted access to finance or credit. There is even an uptick in demand and consequently sales at the top end of the market in the R20 million and R30 million upwards price range.
From a Pam Golding Property (PGP) group perspective we have has seen a steady increase in show day attendance and enquiries, and over the past 12 months (October 2010 to September 2011 inclusive) have achieved an increase in sales volumes or units of almost eight percent, representing an increase in sales turnover of 13.7 percent. In other words, for the 12 month period ended September 2011 we saw sales increase from R9.64 billion last year to R10.96 billion this year.
PGP has seen a significant increase at the top end of the market, reflected by an increase of 40 percent in units sold priced above R6 million, while units from R3 million to R6 million have increased by 21 percent, and units priced from R1.5 million to R3 million are up by 16 percent. However, sales to international buyers remained low at 2.7 percent of total PGP units sold, with the bulk of these buyers from: theUK,Germany,Namibia,Zimbabwe,Ghana,USA,China,BelgiumandSwitzerland. We continue to see increasing demand from buyers in other African countries such asGhana,Nigeria,Zambia, andUganda, as well as other BRICS (Brazil, Russia, India, China, South Africa) countries such as China and India.
As far as the Garden Routeis concerned, the leisure market is slowly showing signs of revitalising after a period of low demand, and coupled with this there are currently good buys available which will provide capital growth in the longer term, particularly at St Francis Links and PlettenbergBay. High end homes in Knysna continue to enjoy high appeal while other towns and hamlets such as George, Sedgefield, Mossel Bay, Witsand and Riversdale with its scenic farms, are attracting buyers aspiring to a better quality lifestyle, or looking to retire to the coast.