As the real estate market recovered during 2012, and sales volumes and property prices increased, the criteria that South Africa’s financial institutions expected people to meet in order to qualify for mortgage loans remained difficult.
Sales volumes and property prices increased last year and the criteria home buyers have to meet in order to get the finance to purchase a property remains difficult.
Peter Gilmour, Chairman of RE/MAX of Southern Africa, says this resulted in many buyers being unable to get the finance to purchase a property. “Despite this challenge, 2012 was a solid year for real estate in South Africa.”
Gilmour explains that high debt-to-income ratios and a poor savings culture are the major reasons why many South African home buyers struggle to obtain finance. South Africa has a domestic savings rate of 20 percent of GDP while emerging markets like China have a rate of 50 percent of GDP.
"High debt and poor savings reflect negatively on affordability levels, which has held back the market and slowed down recovery," he says, adding that for this to change, South African consumers need to focus on clearing their debt and start a savings programme to ensure they can secure home loan finance in the future.
Gilmour notes there were positive events that will have an impact on the market in the years ahead. He says 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 a new era in the real estate business that is synonymous with good governance and transparency,” he says.
The advances in technology have increased the percentage of people finding their real estate agents online.
Gilmour also points to the large numbers of agents who continually qualify with NQF4 and NQF5 certificates. He says these efforts will increase the level of professionalism in the industry and the improved procedures by the EAAB will result in more agents getting their certificates to operate in a timely fashion.
Gilmour says RE/MAX predicts another interesting year ahead as "the more things change the more they stay the same". He says despite all the changes in recent years and technology advances assisting real estate professionals, the fundamentals of being successful remain the same.
One of the most important fundamentals in business is relationships. Gilmour says relationships have always been important, and will remain a vital component of business success. 70 percent of home buyers choose an agent due to some form of personal relationship, while the percentage of home buyers that find their agent online has increased, however, technology will not be able to replicate or replace a personal relationship, he says.
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 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.”
One of the most important fundamentals in business is relationships. Technology cannot replace the personal relationship that is built between a real estate agent and the client.
Gilmour is optimistic about property sales and house prices in the year ahead. As investment in businesses and infrastructure increase, there will be an increase in employment, leading to increased demand for rental properties and property to buy, he says.
He says home prices are expected to continue their gradual rise, especially in the high demand areas and price brackets, while interest rates are expected to remain low, presenting buyers who have cash and can qualify for mortgage finance with an 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.
Buying patterns will also start to be closely linked to the rising cost of living as buyers base their purchasing decisions on living costs more than before. He says as the price of petrol, electricity and the like continue to rise, buyers will buy functionally and be 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, proper insulation and other green and energy saving features.”
Gilmour expects 2013 to be a year of measured improvement in the real estate market. He says although the growth in real estate may not be substantial, it will provide opportunity for buyers, renters, agents and real estate companies to improve their situations and benefit from the relative economic stability that the country has to offer.
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