Property Fundamentals & Relationships Remain Important in 2013

Peter Gilmour, Chairman of RE/MAX of Southern Africa, gives his perspective on the South African property market during 2012 and his insights for the year ahead

While the real estate market continued to recover during 2012, and both sales volumes and property prices showed a gradual increase, the criteria that South Africa's financial institutions expected people to meet in order to qualify for mortgage loans remained onerous.  This resulted in many buyers not being able to obtain the necessary finance to purchase a property, says Peter Gilmour, Chairman of RE/MAX of Southern Africa.  "Despite this challenge, 2012 was a solid year for real estate in South Africa."

Gilmour 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," says Gilmour.

Even though the property market held some challenges in the year gone by, Gilmour notes that there were a number of positive events that will have a great impact on the market in the years ahead.  He says that a significant move was the change of management of the Estate Agents Affairs Board (EAAB) from the Department of Trade and Industry to the Department of Human Settlements, which is being headed by Tokyo Sexwale.  "We have every confidence that this change will have a positive effect on the industry in 2013 and we look forward to new era in the real estate business that is synonymous with good governance and transparency," he says.

Added to this, Gilmour also points to the large numbers of agents who continue to qualify with NQF4 and NQF5 certificates - an effort which he says will result in the continuous increase in the level of professionalism in the industry.  "Furthermore, improved procedures by the EAAB will result in mor agents obtaining their certificates to operate in a timely fashion," he says.

So what does RE/MAX of Southern Africa see as the big issues for property in 2013?

"We certainly see another very interesting year ahead," says Gilmour.  "The more things change the more they stay the same.  Despite all that has changed in recent years and all the technology advances that have assisted real estate professionals, the fundamentals of being successful remain the same."

One of the most important fundamentals in business is relationships.  Gilmour says that relationships have always been important, and will continue to remain a vital component of business success in 2013.  "For sales professionals, 70% of housing consumers will choose an agent due to some form of personal relationship.  While the percentage of homebuyers that find their agent online has increased substantially, technology will never be able to replicate or replace a personal relationship."

Just as relationships form a key element of the property buying and selling process, so leadership is key to a successful real estate business.  Gilmour says that good leadership is still paramount to agents and will largely determine which brokerage companies they associate with.  "Strong principled leadership will continue to characterise successful companies in the year ahead."

Gilmour is optimistic about property sales and house prices in the year ahead.  As investment in businesses and infrastructure increase, there will be a gradual increase in employment which will lead to increased demand for both rental properties and property to buy.

"Home prices are expected to continue their gradual rise in 2013, especially in the high demand areas and price brackets, while interest rates are expected to remain low, therefore presenting buyers who have cash and can qualify for mortgage finance with a great opportunity to invest in a home at a good price."

He adds that due to the limited access to finance, it is expected that the rental market will continue to grow rapidly in the year ahead.

Buying patterns will also start to be more closely linked to the rising cost of living as buyers base their purchasing decisions on living costs more so than ever before.  "As prices of petrol, electricity and the like continue to rise, buyers will be looking to buy functionality - closer to schools, work and lifestyle attractions.  Buyers will also be looking for other cost-saving mechanisms in the homes they buy, such as solar heating, property insulation and other green and energy saving features."

Gilmour concludes by saying that overall, he expects 2013 to be a year of measured improvement in the real estate market.  "While the growth in real estate in the year ahead may not be substantial, it will certainly provide opportunity for buyers, renters, agents and real estate companies to improve their situations and benefit from the relative economic stability that South Africa has to offer.

ANNIVERSARY: RE/MAX EXPANDING IN AFRICA

Real Estate agency RE/MAX celebrates its 40^th anniversary on January 30.  RE/MAX of Southern Africa ranks as the largest real estate franchisor in the sub-continent.  Its chairperson, Peter Gilmour, said that more than 30 new RE/MAX franchises opened in the region during 2012. 

“This brings the RE/MAX of Southern Africa network to over 170 offices and 1800 agents.”

The company was established in 1973 in Denver, Colorado, U.S., by Dave and Gail Liniger.  Gilmour said RE/MAX was recognized as one of the leading real estate franchise companies with the most productive sales force in the property industry worldwide.  In South Africa the brand has also enjoyed great success.

PLETT MARKET STARTS TO PERK UP AGAIN

After a tough cycle, agencies are reporting a slow return to glory for this popular holiday town

Unit sales in Plettenberg Bay are up by about 15 percent, with more than 300 properties sold during 2012 compared to about 260 in 2011, says Seeff principal Kevin Engelsman.  “We more than doubled our sales in the past year; selling 88 properties worth a total of 170 million, compared to 42 units in the previous year.  Although most properties sold in the town are still in the sub-R4m price band, it was encouraging to note that some more expensive properties were sold, at prices ranging from R15,5m to R23m, mostly to Joburg holiday home buyers,” said Engelsman.

“Many of the holiday properties sold over the past year were older home buyers intending renovating.  In particular, homes with sea views or near the beach have attracted significant interest over the past year.”

There has also been renewed interest in vacant plots and about 20 percent of all properties sold over the past the past year were vacant land.  The Whale Rock development plots, which range in size from 1 021m² to 1 600m² and were released at discounted rates of up to 65 percent towards December, sold out within five weeks.  Engelsman says Seeff sold 24 of the available 33 stands at prices that ranged from R162 500 to R330 000.  “Following a period of high price expectation on the part of sellers, serious sellers became more amenable to pricing in line with market demands last year.  We expect that holiday and investor buyers from Gauteng and other inland provinces will continue to look for good value this year.  “Consequently, prices will remain flat.  It remains a buyers’ market and, especially in view of the flat economic growth forecasted for 2013, sellers will need to continue to price conservatively,” he said.

Cheryl Anley, of RE/MAX Prime Properties, which operates in the Plettenberg Bay area, says the demand for leisure property has remained fairly muted.  However; now that the property market is well into the recovery phase, demand for leisure properties has slowly started to increase.

“Property sales in Plettenberg Bay were quiet for the first half of last year, but there was an increase in activity in the second half.  Rentals have also been slow during the year, which is fairly normal, but there was a good demand for the holiday season.”

Sales and prices took a serious knock over the past three years.  The market is still recovering and prices are still stabilizing, so it’s not advisable to buy property with the idea of a quick turnover: However, there has been an increase in sales over the past six months.  We believe we are close to the bottom of the property cycle and the situation will slowly improve from here on,” said Anley.

“Plettenberg Bay buyers and renters are mostly families from Johannesburg, Cape Town and the Free State, although there are some investors wanting to buy property.  Buyers are looking for homes priced between R1.5m and R2m, and the most popular rental properties cost between R2500 and R3500 a day during the high season.” 

Anley said that secure estates and homes close to the beach or with sea views were the most sought after, although price was playing a large role and good buys were becoming more dominant than emotional purchases.  If the price was right, buyers were prepared to upgrade their homes.

According to Pam Porter, principal for Jawitz Properties, Plettenberg Bay, it has become easier for first-time buyers to get on to the Plettenberg Bay property ladder.  “Four years ago, you could not buy a freehold house in Plett for under R1,5m, but now buyers can pick up homes for as low as R1,2m” she said.

“More and more people are relocating to Plett.  It has a great primary school, we are attracting an increasing number of medical specialists and we’re also anticipating the re-opening of the airport.  “There are considerably more freehold property than sectional title sales in the area, and a wide range of properties are available.  On any given street you can find a palatial property neighboring older, smaller homes.  “Properties that are will priced sell well, although some sellers hold out until they get their desired prices,” she said.

“Properties for sale under R4m, are most in demand, with 66 percent of freestanding property sales in 2012 falling in this price bracket – almost double the number of buyers for this price range compared to 2011.”

However, 21 percent of freestanding sales were for over R8m, and Jawitz Properties has been mandated to sell a home in Twin Rivers Estate between the Bitou and Keurbooms rivers at R9,95m.  The 649m² property had a 32m² boat house and a 206m² patio space.

RECESSION RESHAPING CONSUMERS

The next generation of home buyers are more savvy than their parents were

THE PAST few years have been extremely interesting and have irrevocably changed the property market, according to Adrian Goslett, chief executive of RE/MAX of Southern Africa.  “The housing crisis experienced at the end of 2008 changed the dynamic of the real estate environment and has affected most people in some way – and not all the effects have been negative.

“As a result of the recession, the current generation of home buyers has become increasingly more knowledgeable about home ownership.  This is partly because property ownership and access to finance requires more preparation and planning, along with the increased media coverage of property topics that home buyers have been exposed to over the past six years.

“Younger consumers believe that the recession has made them more knowledgeable about the property market than their parents were at the same age.  The increased amount of information about property and easier access to the information through the internet has led to many consumers doing their homework more thoroughly before making one of the biggest investments of their lives,” says Goslett.

“Most consumers aged between 18 and 35 still believe that home ownership is a key indicator of success and are willing to do what it takes to be able to buy their own homes.  Statistics suggest that 75 percent of consumers in this age group value home ownership more highly than taking an extravagant holiday or owning an expensive car. 

“Although the stringent lending criteria of financial institutions have made buying property more challenging now than during the property boom period, many potential first time buyers are eager to do the necessary research and save the required deposits, even if this means a change of lifestyle.”

Adults between the ages of 31 and 45 who are generally well established in their careers are the most active and driving the real estate market.  However; Goslett says adults younger than 30 make up a much larger generation and have already made their presence felt in the market.  Statistically the population in South Africa shows that there were 18.74 million births between 1965 and 1985, and about 28.4 million consumers in the under-30 group.

Goslett says the larger generation will mean the demand for property will steadily increase as these young people come of age to buy their first properties.  However, considering that the average age of a first-time buyer is in the mid-thirties and the oldest citizens born between 1985 and 2010 are now only 27, it could take some time before this generation reaches its full economic potential.

“The Great Depression shaped the lives of the Greatest Generation, while the oil crisis during the 1970s affected the Baby Boomers.  Generation X and Generation Y are now leading the property market after the largest modern-day housing recession we have seen.  It seems that every generation has faced certain economic circumstances that have changed their collective perspective in some way.  Today’s generations believe that the risks, details and rewards of buying property are integral to their planning for future financial success,” Goslett says.

EASY STEPS TO A BRIGHTER FUTURE

While the South African economy has largely recovered from the tough global downturn, many consumers and homeowners are still struggling with the rising cost of living.

So how do consumers save money with living costs on the rise?  Here are a few small steps towards cutting costs, reducing debt and maintaining a budget that allows homeowners to save money: 

Step 1
Paying less money for unnecessary items is the first step to saving money.  Sit down with the members of the family living within the household and make a list of each member's expenses.  Work together to see which expenses are absolutely necessary and which ones can be reduced or cut out completely.  For example, encourage everyone in the family to unplug appliances when they are not in use, pack lunches for work or school instead of eating out and reduce internet or television packages to the essentials.  If two cars are being used in the household, if possible, consider reducing travelling costs by taking one car.

Step 2
Once expenses are identified, divide them into two categories, those that are priority and core expenses and those that are not.  Set money aside each month for the expenses that are nonflexible, such as bond repayments or rent, levies, utilities, insurance.  Other expenses such as entertainment, food and petrol are the expenses that can be reduced to accommodate for more savings.

Step 3
Keep a record of all money spent.  Write down every amount spent in a journal or notepad that can be carried around and then translate all lists kept by family members into one household spreadsheet.  This will help you to formulate a visual aid as to where the money is going and how and where to reduce areas of unnecessary spending.

Step 4
Have a day of the week that is set aside for a cash withdrawal and keep it to only once a week.  Withdraw enough money to cover all weekly expenses, taking into consideration aspects such as spending money.  If the money runs out, do not make another trip to the ATM until the following week.  Check balances online to manage the account effectively.

Step 5
Where possible do not rack up further credit card debt, either use cash or a debit card.  If there is no money in the account or no cash available, do not buy the item unless it is absolutely essential.  Credit cards incur interest and will often lead consumers to spending outside of their set monthly budget.

Cutting costs and adhering to a budget will give homeowners the excess funds they need to put towards savings and create a foundation on which financial freedom is built.  Having a nest egg to fall back on in tough economic times will help homeowners to weather any future financial crisis and protect their most valuable asset, their home.

HELLO FROM PLETT, JANUARY 2013

It seems strange to say goodbye to 2012. By all accounts it has been a "Big" year.  Big drama with nationwide strikes, big tragedy with many people losing their lives in floods in Natal and the Eastern Cape and terrible carnage on our roads over the Festive Season, big joy, with a significant increase in the Matric pass rate, and the birth of our youngest RE/MAX Agent – Alexander Ritchie, son of Agent - Stephen Ritchie…… and even some big sales in our office to help pay the bills.

Now that the last of the mince pies have been consumed, the Christmas decorations packed away and New Year resolutions made and already broken, we have moved into the New Year, hopefully with the appropriate fanfare, and celebration, ready to tackle all that awaits us, not limping in unseen, clinging to what was, or could have been. Embrace the new challenges and victory will be yours!  

Our summer visitors have been blessed with the most perfect weather and warm seas, the ideal combination for enjoying long leisurely days on our beautiful beaches and sumptuous meals in our many restaurants. The summer vibe has been fantastic and the visitors and locals alike have been very patient and well behaved in the queues and shops bursting at the seams, with people eager to stock up with provisions before the “end of the world” which came and went without incident on 21^st December!

The New Year has brought a new set of holiday makers, eager to enjoy our beaches, and keen to view property on “the first bad weather day”, which have been few and far between. From all accounts, this has been our best Season for several years, and everyone seems a little more confident in the future, especially as America managed to avoid falling off the Fiscal Cliff!!

RE/MAX CELEBRATES 40 YEARS OF GIVING BACK TO LOCAL COMMUNITIES AROUND THE WORLD

This year marks the 40^th anniversary of one of the world’s largest real estate franchises – RE/MAX, the leading global real estate brand.  RE/MAX of Southern Africa will commemorate this remarkable achievement on 30^th January 201, known by those in the RE/MAX family has Founder’s Day, the day on which the brand was created.

Adrian Goslett, CEO of RE/MAX of Southern Africa, says that RE/MAX offices around the world will mark Founder’s Day with a number of events and celebrations.  Over the past 40 years RE/MAX has taken the opportunity to celebrate Founder’s Day by giving back to their local communities in various ways.  He says that globally RE/MAX is proud to have raised more than $120 million for Children’s Miracle Network Hospitals, Komen for the Cure, Reach for a Dream and other charities.

“Locally RE/MAX of Southern Africa has donated in excess of R7 million in the past 7 years to charitable causes, and will continue this tradition by launching the first initiative of The RE/MAX Foundation, a non-profit charitable organization that aims to uplift the lives of families and individuals in need,” says Goslett.

Through the RE/MAX Foundation, offices across the RE/MAX of Southern Africa area of operation will be invited to engage with their local communities by collecting both toys and books for a local orphanage, crèche or charity that they nominate.  Members of the communities are encouraged to participate by donating the items and dropping them off at their nearest RE/MAX office or with their RE/MAX agent.  The toys and books collected will be distributed to the various institutions on Founder’s Day, 30 January 2013.

“This is the first campaign of many that will be administered by The RE/MAX Foundation to continue to build up the communities in which RE/MAX of Southern Africa operates.  One of the brand’s mottos is that we don’t just work in a community, we live there to,” says Goslett.  “RE/MAX of Southern Africa is therefore committed to uplifting these communities and the people that live there,” he concludes.