How World Cup property predicictions are panning out

Five years ago property experts predicted that the housing market would flourish, and prices would soar, with increases of up to 50 percent in 2010.

However, at the time nobody's crystal ball showed a hint of the recession which would bring the world to its knees just a few short years after Fifa awarded South Africa the World Cup.

In 2005 experts said winning the right to host the World Cup had created a positive sentiment towards SA property internationally.

At the time, Saul Geffen, the managing director of ooba (formerly MortgageSA), analysed how major global sports events like previous World Cups and the Olympics had influenced property markets in other countries.

"Property prices in Paris escalated by as much as 55 percent over a one-year period before and after the 2002 World Cup and properties across the city made astronomical gains with apartments close to some of the stadia rocketing by over 100 percent over the same period," he said.

"And certain neglected neighbourhoods burst back to life. We expect the same will happen in SA."

Geffen said that hosting an Olympic Games or World Cup encouraged city regeneration and was usually accompanied by an improvement in facilities and transport links.

"Property prices in Athens, Sydney, Atlanta, and Barcelona all got a kicker as new transport and sporting facilities spurred regeneration plans and pushed them ahead of rival cities.

"On average, these four Olympic cities outperformed the national market by 19 percentage points in the five years leading up to the games, but in Barcelona the impact was even greater. Prices there raced ahead by 131 percent compared with 83 percent nationally to open up a 49 percent price gap over other Spanish cities," Geffen said.

Geffen's brother, Barack, the executive director of Sotheby's International Realty in South Africa, agreed. Unluckily, however, a global recession which took hold in the latter part of 2008 has ensured that the Geffen brothers' prediction had no chance of coming true.

But although the 2005 forecasts are unlikely to bear fruit - especially after SA homeowners and house hunters were hit with an additional stumbling block in the form of the National Credit Act, which saw banks tightening lending criteria - it is not all doom and gloom.

This week, Saul Geffen said his company's latest statistics indicated a continued improvement in residential property and suggested that the recovery will continue to be gradual, rather than spectacular.

He said ooba's price index recorded a 1.8 percent increase in the average house purchase price over the 12 months to December 31, 2009, from R854 029 to R870 051.

"The latter part of 2009 saw a steady improvement," said Geffen, "We expect this trend to continue and pick up pace as the economic environment improves and banks ease up on lending criteria," he said.

Absa analyst Jacques du Toit is also hopeful, saying the gradual improvement was due to better economic conditions, the lagged effect of lower interest rates and less tight credit conditions. According to Absa's latest house price indices, residential property prices declined marginally in 2009, compared with 2008.

Vered Estates MD Jonny Novick is also "cautiously optimistic" about the prospects for residential property in South Africa this year.

"We are encouraged that foot traffic at the first few show days in 2010 is substantially up from 2009, which is an accurate indicator of activity in the property market.

"For 2010, we are averaging more than 20 visitors per show house from between 10-15 in 2009."

Novick says, however, that his optimism is tempered for a number of reasons, most notably because banks are still rejecting applications for somewhat frivolous reasons.

"We still see instances of banks rejecting otherwise good credit applications because they are picking up adverse credit reports arising from an outstanding TV licence or pathologist account for as little as R100. Obviously, the banks need to be cautious, but practical."

"I think 2010 will prove to be a better year for property investors than 2009, but whether it turns out to dazzle us, as some people are expecting, remains to be seen."

The Saturday Star

Posted at 09:21AM Jan 25, 2010 by Editor in Residential  |  Comments[8]