SA's property market crash: grim new stats

Latest sales figures from SA's biggest residential real estate sales group depict an industry brought to its knees.

Jeanne van Jaarsveldt, marketing and finance director of RE/MAX of Southern Africa, provides fascinating insight into what's been happening in the residential property market this year through figures compiled by his organisation.

South Africa's largest property real-estate group, in conjunction with BetterBond, on Thursday released statistics around South African residential property buying transactions and property market performance compared to the same period in 2007.

Sales transactions: 2008 vs 2007

There has been a 38% year-on-year decrease in the amount of national property sales transactions (across all property price brackets) between January - July 2008, compared to the same period 2007.

Total properties valued under R499 000 sold this year is 36% less than in 2007. Overall, the amount of sales transactions has decreased year-on-year by 42% for properties priced between R500 000 - R749 000; 39% for properties in the R750 000 - R999 999 price bracket, and 33% for properties with a R1 million to R1, 499 999 value.

In the higher price brackets, the largest decrease is recorded in the R1,5 - 2,5m price bracket: total properties sold so far this year is almost 50% less, compared to properties sold in this value bracket in 2007.

There has been a drop of 44% in sales where properties have values exceeding R2,5m.

Most active property price brackets (national)

Of the total national transactions conducted by buyers and property investors (all provinces) between January - July this year, the highest frequency of buying activity, with 43% recorded, was in the price bracket of R499 999 or less.

This was followed by 25% for homes priced between R500 000 - R749 000, 15% for homes priced between R750 000 - R999 999, 12% for homes priced between R1m to R1, 499 999, 4% for homes in the R1,5 - 2,5m price bracket, and 1% for homes over R2,5m.

Regional figures

The total amount of national transactions in the R499 999 or less price bracket from January to July in metropolitan regions was: 29% for Gauteng, Limpopo, Mpumalanga and Northwest properties, 22% for the Western Cape, 18% for Kwa-Zulu Natal, 9% for the Eastern Cape and 2% for the Free State. The remaining 20% is recorded for property sales in non-metropolitan or rural areas across all nine provinces.

In the category of metropolitan sales across all regions in the R500 000 - R749 999 value bracket: Gauteng, Limpopo, Mpumalanga and Northwest recorded the highest total with 41%, followed by Kwa-Zulu Natal (20%); Western Cape (18%); Eastern Cape (6%); and the Free State (2%). 13% is recorded for sales activity conducted in non-metropolitan/rural areas in all nine provinces.

In the price category of R750 000 - R999 999 for metropolitan sales transactions: Gauteng, Limpopo, Mpumalanga and Northwest again leads with 39% recorded, followed by the Western Cape (23%); Kwa-Zulu Natal (19%); Eastern Cape (6%) and the Free State (4%). The remaining 9% is recorded for non-metropolitan / rural areas sales activity.

In the R1m to R1, 499 999 price category for homes purchased between January until July in major metropolitan regions, the highest percentage of transactions were recorded in Gauteng, Limpopo, Mpumalanga and Northwest - at 42%. The Western Cape records 25%, Kwa-Zulu Natal 17%, Eastern Cape 3%, Free State 1%. Sales in non-metropolitan / rural areas amount to 12%.

In the property price bracket R1,5 - 2,5m, Kwa-Zulu Natal leads as the best performer taking 28% of all sales transactions, followed by the Western Cape (27%); Gauteng, Limpopo, Mpumalanga and Northwest (26%); the Eastern Cape (4%) and the Free State (1%). The remaining 14% is recorded for transactions in non-metropolitan / rural areas across the nine provinces.

In the highest property price bracket, ie R2,5m and above, the Western Cape has the largest amount of sales transactions (36%), followed by Kwa-Zulu Natal (32%), Gauteng, Limpopo, Mpumalanga and Northwest (20%), the Eastern Cape (4%) and non-metropolitan / rural areas of all South African provinces taking 8% of the total.

With signals of a slight market recovery on the way, the effect of increased interest rates, accelerating consumer inflation as well as the stricter lending criteria from all major financial institutions has highlighted that the one single key buying motive for consumers will remain affordability, and the ability to sustain their debt exposure.

Data release by RE/MAX of Southern Africa shows that there is a major shift towards properties in the lower price bracket, whilst premium properties in excess of R2,5m in the Western Cape remains in highest demand across South Africa.

During the course of August, RE/MAX has noticed a definite revival in the property market, with many RE/MAX offices recoding their highest number of property sales for any given month in 2008.

One thing is clear, the way lending institutions look at consumer risk and debt exposure has forever changed the face of the real estate market and both consumers as well as estate agents will need to learn to adapt to these rapid changing environment."

Article by: Jeanne van Jaarsveldt - www.realestateweb.co.za