Housing demand to rise 'dramatically'
The world-wide expectation is that a scarcity of capital will prevail in 2013, resulting in no increase in mortgage lending.
So says Neville McIntyre, chairman of Aida's parent company Jigsaw Holdings, says
"The demand for housing, on the other hand, is set to increase dramatically, so we foresee a slight increase in the number of property transactions and in the number of new developments coming to the market. There will also, of course, be strong demand for rental properties, which will be good for buy-to-let investors and prompt an increase in investment purchases."
He says large numbers of "distressed" properties being brought to market by the banks and sold below market value will suppress home prices in 2013. These "bargain" properties will sustain activity and awareness and make home ownership more accessible for quite a number of people.
McIntyre also says that a lack of skills and capacity in government and planning departments, as well as in some deeds office branches remains of serious concern to the property industry. It causes major delays in developments, zoning approvals and transfers, and that has financial implications for everyone in the property sale chain.
Rudi Botha, chief executive of mortgage originator BetterBond, doesn't expect any rise in the prime interest rate until at least the end of 2013.
But many prospective homebuyers will remain unable to take advantage of low interest rates that make home ownership more affordable, so there is also unlikely to be any significant rise in home sales or prices next year, he says.
"The problem is that many households still have just too much debt to qualify for home loans, and the situation has being exacerbated this year by huge growth in unsecured lending, particularly by loan sharks who take advantage of consumers and charge exorbitant interest rates that just sink people deeper into debt."
He believes the banks, while retaining their strict credit criteria, will be focusing more on secured lending next year rather than personal loans and other forms of unsecured lending, and this will encourage consumers to pay down their debts and save the deposits they need to get home loans at advantageous interest rates.
And that should bring about an improvement in home loan grant rates and home purchases towards the end of 2013.
Botha says first-time purchases, which account for 40 percent of the total, will continue to be the main drivers of the market next year, as they free up existing owners or developers to make further purchases or start new projects.
"We do, however, expect buyers at all levels to respond to ever-rising food, fuel and utility costs, and higher property taxes, by continuing to 'buy down' to smaller and less expensive properties, and this will also constrain house price growth, especially in the upper sectors of the market."
Berry Everitt, managing director of the Chas Everitt International property group, says 2013 will be the year when property developers start making a moderate re-entry into the market.
"There has of course been some development at the lower end of the market for the past few years, because buyers in this sector are often subsidised or able to gain special access to 100 percent home loans. However, I expect developers will become increasingly active in the R650 000 to R850 000 price bracket where the banks are lending well, especially on newly-built homes."
He believes banks will continue, for most of next year, to keep a lid on the market by valuing properties and lending according to bank security value, which doesn't necessarily coincide with market value.
"In other words, they will often not be prepared to lend as much as the prospective buyer is willing to pay, leaving serious sellers little choice but to lower their prices if they want to conclude sales."
An alternative response is for buyers to increase their deposits, but this seldom happens, and it is more likely that buyers will abandon deals if sellers won't budge, and look for cheaper properties.
"So either way, this practice is likely to prevent the rising housing demand that we see occurring next year from being translated into rising property prices, as it usually would be. In fact, we don't expect nominal house price growth to top inflation next year."
He says major brands will add to their franchise offerings new systems and processes for managing long-term and holiday rental properties, to "recession proof" their franchisees.
Lew Geffen, chairman of Sotheby's International Realty in SA, says he expects a much more buoyant residential property market in 2013.
"The recession is over, not only economically but also psychologically, and consumers are now much more confident about moving on with their lives and advancing their home ownership plans. Housing demand is increasing at all levels, and although bank caution is slowing sales in the underR1.5m category, this is much less of a problem in the higher price sectors, where buyers generally require finance for a smaller percentage of the purchase price."
Sotheby's has experienced a sales surge in the R6m to R10m range, driven mainly by South African buyers taking the opportunity to upgrade to larger and more luxurious properties at the current favourable prices - in the belief that these won't hold for more than another year.
Geffen expects overall price growth in 2013 to be constrained at around the level of inflation until more stock is absorbed, but is confident prices will start to climb strongly in 2014, which he believes will be the start of a new boom.
Jan Davel, managing director of the RealNet estate agency group, says household finances are likely to remain under severe pressure in 2013, which will limit the ability of prospective buyers to qualify for bonds and become home owners.
"On the one hand, the increased consumer demand for credit in 2012 has been matched by aggressive lending for personal loans, and many households will be carrying increased debt loads into 2013.
"Then on the other hand, real disposable incomes are likely to shrink due to such factors as Eskom tariff hikes, rising food and fuel prices, higher municipal rates and the introduction of e-tolling in Gauteng. So debt ratios that have been declining will, in many cases, go back up again and choke off demand. Many households will simply not be able to qualify for home loans, despite the fact that interest rates are expected to stay low in 2013.
"And those same low interest rates will make it difficult even for those without much debt to grow their savings and pay the substantial deposits that banks so often require now to grant loans."
Meanwhile, says Davel, there is an abundance of distressed properties being sold by the banks at much-reduced prices - about 80 percent of current market value, on average - and this will have an additional negative effect on house price growth.
"Consequently, we expect relatively low nominal house price growth during 2013, and negative real house price growth, similar to that in 2012."
He says the property industry will be going through a "detox" next year, as current estate agents have until the end of 2013 to bring their minimum qualifications up to date, and Continuous Professional Development has also been brought into play.
"These barriers to entry, together with legislation like the Consumer Protection Act, rising consumerism, ever improving technology and a much more efficient Estate Agency Affairs Board will all have an extremely positive influence on the industry, since agents who don't pay attention to the new training requirements, skills intensities, rules, procedures and market conditions will be unable to keep up with those who have geared up for a more professional arena. The industry will say goodbye to many of the ' not- so- good' operators," says Davel.
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