Luxury house sales point to upturn

03 Aug 2009 - I-Net Bridge -

Intro
House prices are expected to decline by 10% this year, but the luxury end of the market is showing strong signs that the residential market is at a turning point.

By Don Robertson

House prices are expected to decline by 10% this year, but the luxury end of the market is showing strong signs that the residential market is at a turning point.

Sales of luxury houses by the Johannesburg offices of Sotheby’s International Realty SA have risen by 21%, to 726 units in the first half of this year compared with the same period last year.

The average price rose to R7.5-million from R5-million, said chairman Lew Geffen.

The sales trend in Johannesburg is similar to those in other major cities, he added.

“Much of the additional activity has taken place in the past couple of months, which has seen the sale of a property in Bryanston for R50-million and another in Sandhurst for R35-million.

"We have also seen a 45% increase in the total value of luxury properties sold over the past six months.”

Sales in the luxury market are usually not directly related to a decline in interest rates, but rather to confidence in a turn in the economy.

“Many big-ticket purchases are made with cash, so buyers do not really have to worry about home loan interest rates.

"They tend to be much more influenced by an increase in business confidence and the medium- to long-term economic and employment prospects that will drive future housing demand.

“Those shrewd buyers are always the first to see a good opportunity and are comfortable that the market is currently at or near the bottom and will start to turn upwards in a few months.

"This may already be happening in Johannesburg, with our overall sales volumes currently 13% higher than last year and turnover up by 58%,” said Geffen.

He cautioned, though, that prices across the board will not necessarily start rising.

“The main reason why the market is stabilising and unit sales increasing is because prices have come down substantially and buyers are making an effort to get in near the bottom.

"Sellers who think the halcyon days are back again are mistaken as prices are likely to remain at these levels for some time to come.”

Jacques du Toit, an analyst at Absa Retail Bank, said luxury houses had performed better in recent quarters than those in the middle segment, where prices declined in all categories.

“This may be the result of the upper end of the market to some extent being less affected by trends in economic indicators such as inflation, interest rates, employment and income,” he said.

Article from: Business Times