Slowdown in Cape property sales is much exaggerated

Lanice Steward, MD of Anne Porter Knight Frank, says that it continues to surprise her that some Cape property analysts talk of a significant slow-down, stabilisation or “normalisation”.

“Our experience at Anne Porter Knight Frank does not bear this out – but, more importantly, neither do the latest RPPR (Residential Property Price Ranger) figures.”

Steward said that the RPPR figures for Cape Town’s southern suburbs show that there was an 18% rise in average house sales prices between October 2006 and October 2007 – from R1 675 000 to R1 996 000.

This, she said, had been achieved despite the unit sales drop-off which appears to worry some commentators so much.

“The relevant figures for the southern suburbs are 120 units sold in October this year and 142 units sold in October last year. This,” she said, “is not a serious drop – and it is worth noticing that this year’s October sales of R239 million were the highest monthly figures (with one exception) since May 2006. Talk of a recession or a serious slow-down therefore seems to me to be out of line.”

Much the same picture, said Steward, emerges from the RPPR figures for the Atlantic Seaboard with this difference, that this market reached an exceptionally high peak in late 2006. The average unit price of properties sold here in January this year was R3 765 000. In the April/June period it was R3 495 000. Again, there is, said Steward, no sign of a crash.

Steward said that she is now expecting two 0,5% rises in the interest rates before April next year but, she said, Dr Azar Jammine, speaking at the Nedbank Econometrix Review, predicted that thereafter the prime rate will remain steady at ±15% for two to three years.

“This,” she said, “will stabilise the market for the long term.”

The casualties in the market right now, said Steward, are mostly in the lower brackets, especially where people took 100% bonds.

Fortunately, she said, the SA banking sector had not made the USA’s mistake of lending purely on the expectation of a rise in prices, not on credit worthiness.

R1 million bondholders in SA are now paying ±R700 more than they were in June when the interest rate was 13%.

“The overall Cape property picture remains very sound, with the trend in rising prices set to continue for at least two or three years,” said Steward. “Cape residential property remains an excellent investment.”

Article by: LANICE STEWARD -