2013: THE YEAR OF TRANSFORMATION

Adrian Goslett, CEO of RE/MAX of Southern Africa, looks at the property sector moving forward in the era of transformation during 2013.

Despite the prevailing challenging economic circumstances experienced in the property market, 2012 has been a good year for RE/MAX of Southern Africa, says Adrian Goslett, CEO of RE/MAX of Southern Africa.  He points out that during 2012 RE/MAX of Southern Africa has seen a marked increase in the number of property sales achieved per agent.

"During the first half of this year RE/MAX of Southern Africa saw a 12% increase in sales when compared to the same period of 2011.  In addition, more than 25 new franchises opened in the Southern African region - which includes South Africa, Namibia, Botswana, Swaziland, Lesotho, Mozambique, Zimbabwe, Zambia, Angola, Mauritius and the Seychelles - up to the end of October 2012.  The brand is continuing to grow its footprint that encompasses 170 office locations and over 1800 experienced estate agents," he says.

Locally RE/MAX agents account for approximately 6% of total agent numbers and for approximately 15% of all sales transactions.  "The average number of years of real estate experience within the RE/MAX of Southern Africa group is over 10 years, and our average agent commission earnings up 31% in 2012, compared to the 2010 figures," says Goslett.

He notes that much like last year, 2012 can be called a success for RE/MAX of Southern Africa and its agents and it is expected that the company will continue to flout industry norms in 2013.

So what factors will influence the property market and those within the industry moving forward into 2013 the most?  Goslett looks at a few elements that will influence the trading environment that property professionals find themselves in:

Access to finance:
Over the past year the rand value of the gross debtors' book for mortgages has shown an increase as has the number of applicants applying for bond finance.  Goslett says that this is due to the fact that South Africa's financial institutions have marginally relaxed their lending criteria to the point where close on 51% of all home loan applications are approved.

Goslett points out that high debt-to-income ratios and a poor savings culture are the major reasons why many South African homebuyers have struggled to obtain finance.  South Africa only has a domestic savings rate of around 20% of GDP, compared to other emerging markets like China which has a domestic savings rate of around 50% of GDP.  "High debt and poor savings reflect negatively on affordability levels, which has held back the market and slowed down recovery.  For this to change in 2013, South African consumers will need to focus on clearing their debt and starting a savings programme to ensure their ability to secure home loan finance in the future," said Goslett.

He adds that due to the limited access to finance, the rental market will continue to grow rapidly, which will assist investors who have a buy-to-let portfolio.

Deposits required:
While financial institutions will continue to have a greater appetite for risk, 100% bonds will still be few and far between in 2013.  Statistics suggest that over the last 12 months only four out of every 10 bonds granted are for 100% of the purchase price.  This means that six out of every 10 successful applicants have had to pay deposits to secure a property.  The average deposit requirement for repeat buyers has risen to around 20% of the home's purchase price, in other words, buyers are required to have a fifth of the purchase price in cash.  For the first-time buyers, who account for approximately 35% to 40% of the home loans granted each month, the average deposit required is around 12% of the purchase price.

Transformation in the industry:
A few years ago estate agent training and qualification were at the forefront of the industry and there was a stronger focus on the professionalism of the industry players with many agents achieving the necessary NQF levels required.  Once again, 2013 will see the property industry transform, this time in the form of a revamped Estate Agency Affairs Board (EAAB).  Goslett says that Tokyo Sexwale and the Department of Human Settlements are taking a proactive approach to resolving the issues within the industry and the EAAB with the focus on professionalism and transparency.

One of the goals of the EAAB will be to ensure that the property industry is more representative of all races and genders, with an emphasis on attracting the youth into the industry.  The number of estate agents in South Africa has dropped from 80 000 in 2008 to approximately half that figure or less as a result of the global economic recession. 

Goslett notes that real estate businesses that promote and encourage transformation will continue to thrive and gain support across the South African market spectrum.  RE/MAX of Southern Africa has, for a number of years, been highly rated as a BBBEE organization.

Technology:
With the constant evolution of technological advancement, technology will continue to play a vital role in the property industry in terms of marketing strategy and interaction between real estate professionals and their clients.  The trend of searching for property online will continue to gain momentum and more and more buyers will find their dream home through online property search portals.

Fair market value:
In 2013, property pricing and the perceived value of property will continue to be an important factor to the success of a sale.  Statistically, if a property is priced correctly it will be sold within the first four weeks of being on the market and generally it will sell at the asking price.  "Although sellers are the ones that set their asking price, property pricing within a certain market is largely determined by what a buyer is willing to pay for that property," says Goslett.

According to ABSA, the first ten months of 2012 saw house prices marginally down by around 0.6% year-on-year, while the FNB house price index revealed a house price growth rate of around 6.6% in August this year.  The index's average price of homes transacted was R865 900.  Goslett says that although house price growth has subsequently improved slightly, RE/MAX expects that trading conditions and the house price growth will remain relatively low during 2013 and follow a similar path to what we have seen during 2012.

"With property market activity and constantly increasing, so much so that certain areas are reporting stock shortages of certain types of property, 2013 is bond to a year of change with transformation coming to the fore of the property sector," Goslett concludes.