SA’s greedy homeowners slammed

A LEADING national estate agent says sellers are asking “ridiculous” prices for their houses, which could burst the property bubble.

Johannesburg estate agent Lew Geffen, chairman of Sotheby’s International Realty, warned that sellers were “drunk with power” and needed to “come to their senses”.

“While sale prices continue to rise, the pool of buyers able or willing to pay those prices is shrinking rapidly,” he said this week.

Geffen said his company figures showed sales volumes down 25% this year.

Its strike rate — the percentage of advertised homes that are sold — was down to about 20% in the past two months, compared with a high of about 40% in a healthy market.

“We finished off last year with an average price of sales at R1-million. It’s been running at R1.5-million for the past nine months, which means the market’s average price has gone up 50%. To my mind, this is too much, too soon,” Geffen said.

He blamed the excessive price increases on “inexperienced developers” hoping to make a quick buck.

“The price per metre has gone from what it should have been, at around R7 000/m², to R10 000/m² and more.”

Four years ago, luxury units in Johannesburg’s exclusive Sandhurst were being sold for R6 500/m². They were now marketed at R17 500/m², he said.

Bruce Peach, CEO of development company Summercon, dismissed Geffen’s concerns about developers inflating property prices as being counter-productive to business.

He said there were “fly-by-night” developers, but most of them lasted only about 24 months.

“You cannot inflate prices because the market suddenly seems to be good for a couple of years,” he said.

Other estate agents also disagreed with Geffen, saying the market was still going strong.

In line with international trends, South Africa is in the grip of a property boom which has seen prices increase by about 26% in the last year — the second highest rate in the world according to The Economist’s latest global house price index. This was up from 19% the previous year.

But a report by global financial services firm Morgan Stanley two months ago named South Africa as one of seven countries where property was dramatically over-valued.

UK house prices were also faltering, according to research by Merrill Lynch, sparking speculation that the housing boom there was over.

The Economist’s house price index showed that the rate of increase in property prices in Australia was also slowing down.

But Ronald Ennik of Pam Golding Properties hit out at Geffen — who said he had expected a “predictably negative” response from his colleagues. “I absolutely disagree with Lew Geffen. We’ve still got a long way to go before this property market is really cooking,” said Ennik.

“Is his talking the market down like this a move to push the sellers down in their asking prices?”

Herschel Jawitz, CEO of Jawitz Properties, said the high property prices were not sustainable, but he did not foresee an immediate burst.

“There’s a difference between prices falling drastically and prices increasing at a slower rate,” he said.

“They cannot continue to climb at 20% per year, but I think the increase will settle at somewhere between 10% to 12%, and that’s an acceptable level.”

Jawitz said there was already a “tapering off” at the top end of the market for properties priced from R3-million upwards. Signs of a slowdown included a sudden drop in demand for houses and properties staying on the market longer.

Article from: www.sundaytimes.co.za - KAREN VAN ROOYEN