Stock market slump no cause for property panic

Tumbling share prices and financial upheaval around the world should not cause undue alarm among SA property investors and homeowners.

So says Aaron Hodson, head of international growth for Harcourts, the Australasian real estate group that recently bought a multimillion share of SA group Homenet. He notes that historically, investor interest in bricks-and-mortar has always picked up when stock markets declined, and given property a boost.

“When share prices fall, people look for security for their money elsewhere, in gold and property, for example, and this looks set to be the case in SA this time around too, as there has been a distinct increase in the number of potential buyers coming to the market in the past three months.”

He says that amid the current global financial turmoil, the SA real estate market also has another important factor in its favour, which is not the case in more developed countries such as the US and the UK, where property prices are taking a pounding. “This factor is SA’s huge ‘market in waiting’, made up of millions of people who used not to have access to the property market but are now getting good jobs and salaries and regard home ownership as very important.

“They are continuously feeding into the lower end of the market and there will be a positive knock-on effect all the way up the scale as more and more grow out of their first homes and start upgrading. This will underpin property’s status as a solid investment.”

Homenet CEO Martin Schultheiss says SA also has the advantage of a strong banking system that has been relatively untouched by the global meltdown. “Yes our banks are extremely cautious about all forms of credit at the moment, including home loans, but this forces homebuyers and investors to be better prepared for property purchases - which are after all major transactions - and more thoughtful about what sort and size of home they buy, and that is not a bad thing.

Meanwhile, Hodson says, there is also no cause for despair among estate agents and agency principals either. “They need to remember that housing is a basic human need – people will always get married, get divorced, die, have children, be promoted and be moved around, no matter what is happening in the financial markets, so there will always be a market for homes.

“There will also always be sales, and while many agents are dropping out of the industry now, we see this as a time of great opportunity to recruit strongly and gain a bigger share of the market. Indeed, those companies which took this same view when interest rates went through the ceiling and sales fell through the floor in 1998 are the major players in the sector today.”

Indeed, says Schultheiss, this is a big part of the rationale for Homenet’s recent deal with Harcourts. “With 600 offices, this group has the business systems, marketing methods, technology and tools to enable our franchisees and agents not only to see out the tough times, but to succeed in a sector that is rapidly being globalised. In just a couple of weeks we have already attracted six new offices to the group and the prospects for further growth are excellent because of the Harcourts value proposition.”

Article by: