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 South
African buyers are railing against the price of local property, which
according to Jacques du Toit, senior property analyst for ABSA Home
Loans, has grown a phenomenal 284 percent since the beginning of 2000.
However, home ownership is still relatively cheap when compared with
London, New York and even Moscow.
These cities are, according to the Global Property Guide of 15 January
2008, home to the world’s most expensive apartments. Central London
buyers are paying £10 960 to £18 214 per square metre (R168
195 to R279 527) for apartment space, while buyers of prime real estate
in New York are being charged anywhere from US$13 270 to US$22 923 (R102
212 to R176 546).
According to Mike Bester, CEO of Realty 1 International Property Group,
these figures translate to R208 000 per sq metre in London and R130
000 in New York on average. This is substantially more than the price
per square metre of a two bedroom flat in Cape Town, which the GPG puts
at around US$2784 (R20 000).
And while price growth for the average house has slowed dramatically
since peaking at about 38 percent in 2004 (In 2000, the average house
price in South Africa was R250 800. By the end of 2007, it had reached
R963 700, according to Absa), Bester believes it will continue to grow
in 2008, albeit at a much slower rate and that even expensive houses
may show low growth.
This growth should coincide with steady and ongoing global demand for
South African gold and platinum among other exports, all major props
to South Africa’s economy, he says. In so doing, South African
property should provide a counterfoil to any downward movement of international
share prices, which is widely expected by international financiers on
the back of the USA’s current financial crisis.
It's the wrong time to try and play catch-up with the elite destinations.
Yet, he adds, while South African property prices are relatively low
by world standards, this should not incentivize local sellers or estate
agents to hop on to the bandwagon. “In a world affected by the
USA’s near recessionary status, one of our greatest economic strengths
and a major stabilising factor is our real estate,” he says. “Buyers
the world over are pulling in the stops so it’s the wrong time
to try and play catch-up with the elite destinations.”
Sellers will therefore play a key role in terms of the country’s
real estate sector being successfully able to weather the tightening
global economy, Bester says. “Sellers need to accept that the global
situation, along with the current state of our political and crime environments,
is putting pressure on the South African economy. Buyers know this.
It’s evident throughout the country.”
Far from a doom and gloom situation, though, Bester says people generally
have faith in property ownership. “There is a growing culture of
home ownership in our country where people want to own their own properties.
They see real estate as a good and stable long-term means of wealth
creation as well as a place to live and raise their families, which
is all good news for sellers.”
“But they refuse to over-commit financially,” he adds pointedly.
“It’s the end of the road for over-priced sellers who are
as responsible for the slowdown in market activity as are the rising
interest rate and the National Credit Act.”
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