Residential property prices are perking up

So why don't we all feel cheerful?

A property sales' consultant in a foul mood phoned me this week to vent some spleen. Why, he demanded to know, do people visit show houses that are hopelessly beyond their financial reach, presumably wasting time for themselves and the estate agency person on duty in the home for sale?

Of the eight people who popped through his assigned Bedfordview home at the weekend, seven hadn't bothered to even get a ball park figure from a bank or mortgage originator about what their shopping price range might be, and one had a deposit that would never come close to securing the upmarket property. Adding insult to injury, the consultant spotted some visitors throwing his business card and marketing brochure out of the car window as they drove on to the next open home that afternoon.

These weren't the only matters troubling him. The Bedfordview property man was fairly miffed that some economists and estate agents have suggested the worst is over for the residential property market. After all, the mass of "for sale" boards in his area alone suggest it is a buyers' market, though there are few buyers who qualify for mortgages these days.

Lightstone's figures have been the most promising of all, with its latest national repeat sales figure showing house prices bottoming out at the beginning of the year and now on a "modest upward trend". Said Lightstone director Andrew Watt: "Monthly house price inflation (which tracks the month-on-month house price trend) was up 0.24% from March to April. This continues the positive trend we have been monitoring since January and appears to confirm that recent house price growth has moved out of negative into modest positive territory."

Watt said his organisation had reflected carefully on the data. "Given the volatility of monthly house price inflation, we have been cautious to confirm this positive trend, but four consecutive months of positive monthly figures gives us the confidence to confirm that house price are on the rise again," he said.

Absa's senior property analyst Jacques du Toit said Lightstone's figures are "most interesting". He said Absa's house price index "also shows the price cycle is most probably starting to bottom".

Responding to the Lightstone data, FNB Home Loans' strategist John Loos said his index "also suggested a turning point of sorts". "Yes, I still believe we are in price deflation, but that's starting to lessen," he said, adding that his index is more bearish than others. It has eased from about -9.7% to -9.5%, which is a lessening of the inflation trend and positive growth is not expected this year and only possibly in 2010.

No-one can call the bottom of the residential property market with absolute accuracy. This is because unlike shares, the identical asset is not being publicly traded. Lightstone's data comes closest to comparing apples with apples, however the size of the sample would inevitably be smaller than those analysed by Standard Bank, FNB and Absa through their home loans' divisions.

But, as Du Toit points out: although the levels may be different, the stats are all generally indicating that we are near the bottom of the property cycle and that things are looking better ahead of us.

In short: the recovery is expected to be slow and much will depend in the medium-term on how the global economy weathers its challenges.

Many estate agency bosses are saying something similar, and that buyer activity has increased in the form of inquiries about properties and increased show house attendance, though they concede this buyer activity hasn't yet translated into sales. Banks are also slowly but surely easing up on their lending criteria again.

Samuel Seeff, chairman of Seeff Properties, sums up his theory that "the market has levelled out". "It appears as if the banks are loosening (slightly) their loan to value criteria, which should ensure that the increased demand we're experiencing now will result in more sales going through. This will serve to eliminate some of the glut of stock that we've had until now and ensure that the balance between demand and supply will move towards equilibrium at year end. As a consequence, my view is that we will see prices stabilising, firming and increasing slightly in 2010 - Roll on 2011!"

For the Bedfordview worker bee though, minor easings of credit criteria and an uptick in "activity" at showhouses don't amount to much, particularly when you consider that many people are just popping in to ease Sunday boredom.

So, with residential prices perking up and talk about the cycle turning, why don't we all feel as cheerful as Watt, Du Toit or Loos? And who is right? The man on the ground, people like the Bedfordview property consultant who is at the coalface, or the estate agency bosses and bank number crunchers?

Possible answers to these questions arrived this week in the form of Cees Bruggemans' The Rex Column. Bruggemans, chief economist at FNB, opined that "at cyclical bottoms a recovery hardly feels like one. It feels far more like a funeral".

For various reasons, not least of all the global political imperative to create jobs, Bruggemans suggests the worst of the economic pain is over.

But he cautions that "talking recovery from very depressed levels is foremost a technical story, a numbers game". "No longer falling, or levelling out, the numbers are creeping up, though the industry survivors are mostly too bomb-shocked to notice. Things will feel numb for a long time," says Bruggemans.

He says too that "the conventional wisdom is also caught in this numbness". The growth collapse was abrupt and deep and there are many walking wounded in the ranks, whose priorities have changed.

In a nutshell, the message is this: the market is perking up but we are coming off a low base at a slow speed. That people are returning to show houses is a sign they are warming to the idea of a property purchase. The fact they're shopping in the wrong bracket and without any prior investigation of their financial options suggests they're still too numb to figure out a very nice home might be within surprisingly easy reach.

It seems our Bedfordview man, and others in his position, can expect many more Sundays entertaining window-shoppers and picking up crumpled pamphlets in driveways before they strike a rich seam of eager, able buyers.

Jackie Cameron is editor of Realestateweb - South Africa's fastest-growing property news site. Write to her: jackie@realestateweb.co.za, or add your views about the property market, below in the comments' section.

Article by: Jackie Cameron - www.realestateweb.co.za