Lanice Steward gives her reasons for "Total" confidence in SA residential property

The turmoil and near-collapse experienced in the world’s financial markets in the last three weeks have left people wondering just how all this will impact on the South African residential property market, says Lanice Seward, MD of Anne Porter Knight Frank.

“Once again,” she said, “we are seeing highly qualified economists predicting that this or that will happen in SA as a result – but often this is pure speculation.”

Recent comments, said Steward, reminded her of the final quarter of 2007 when several top economists predicted that after one more interest rate hike in February this year, the market would stabilise.

“What did happen was that we were subjected from December onwards to a further three increases totalling 2%. The plain truth is that two out of the three commentators, all involved daily in property, got it wrong.”

So – acknowledging the likelihood of error – what can we expect for the year ahead?

Steward said that certain realities are still with us and it is these we should be taking into account.

“The first is that the South African economy and banking system have been to a degree protected by our conservative exchange control laws and the National Credit Act.

“Although none of us in property welcomed the Credit Act, it is now clear that, at a time when spending was getting out of control, it saved many people from over-exposure to debt and forced them to drop too grandiose home-owning plans.

“Secondly,” said Steward, “South Africa has won the admiration of the world once again for handling a major political change – Mbeki’s resignation – without violence or upheaval. Mbeki stepped down with dignity- and, as FW de Klerk has reminded us, in pursuing his new course, has chosen to fight what he sees as an injustice by constitutional means, i.e. through the courts. This has not gone unnoticed by the world and is a further step towards our being accepted as reliable and politically mature – something not yet achieved by many African countries.

“Thirdly,” said Steward, “the entire SA economy, and SA property in particular, are now being boosted by the ongoing growth of the new middle class. Their desire for better homes will result in continued development, especially in the R400 000 to R800 000 bracket.”

Looking at the long-term prospects, Steward said that history has shown that downturns of the kind the global economy is now experiencing are necessary, are cyclical and are followed by upturns in free market economies.

The question, therefore, is “Where are we in the current cycle? – on the upswing or the downswing?”

“What many property watchers fail to appreciate is that the property market started to decline around 2004. I know that prices at that time were rising as never before but the number of units sold actually declined from the middle of 2004 onwards. The downturn has, therefore, been felt for over four years – and in my view, is now levelling off: RPPR figures for the Western Cape show a slight upkick for September – and I predict this will continue. This, incidentally, is a view shared by both Bill Rawson of Rawson Properties and John Schooling of Stag.”

APKF’s investor client base, said Steward, are aware of this and are once again moving back into residential property, with their optimism strengthened by the recent figures from the 2010 soccer World Cup leaders. These indicate that SA will attract over 500 000 visitors in the four month run-up to the event, over the two months of the competition and in the six months thereafter.

What, therefore, is Steward’s message to the property sector?

“It concerns me,” she said, “that so many people remain timid, negative and pessimistic. In my view, the SA miracle continues and I would advise those now adopting a wait and see attitude in residential property to be bolder. If they wait too long they will miss the boat. Those who did best in the last price upturn started buying in 2002/2003. My advice is to do the same now while those heavily discounted bargains are available.

Anne Porter Knight Frank have this week had the best attendances at their show houses for a long time. One show house attracted 18 groups or couples of interested buyers and a number of offers were taken.

“Serious buyers are now again much in evidence,” said Steward.

Article by: