The year passed has seen a marked improvement in property sales, with the last couple of months characterised by demand outstripping supply in certain metro areas, says Adrian Goslett, CEO of RE/MAX of Southern Africa. He expects a continued steady improvement in the property market in the year ahead, with house prices in metro areas rising due to lack of supply.
“There is no doubt that the real estate environment has seen some dramatic changes over the past few years, and there are more challenges and change ahead. In 2015, the ‘game changers’ for real estate agents in the continually evolving realm of property transactions will lie in their core values and company culture, their relationships with their client base and their ability to tap into and use technology for a competitive advantage,” says Goslett.
One of the clear trends currently apparent in the market, according to Goslett, is the segmentation of agents. “There are two types of agents: counsellors, who are the professional real estate agents that achieve excellent results, and facilitators who merely bring buyer and seller together and hope for the best.” This has resulted in approximately 15% of the agents currently operating in the market writing 80% of the real estate business.
Goslett says that in the US, consumers are now starting to rate agents through online tools based on their home buying and selling experiences and the overall level of customer service they received. While many estate agencies have customer service feedback systems, he expects the rating of agents to emerge in the South African market more publicly during 2015.
There has also been a decline in commission rates in the US in recent months, down to an average of 5,2% from around 7%. South African real estate agents commission rates are also seeing a decline, something Goslett anticipates will continue well into 2015.
“In a price sensitive environment, agents will have to provide value to the client and the transaction in order to justify their commission. Clients are increasingly looking for service driven individuals that are good at what they do, can be trusted and provide personalised care and attention to their needs,” he says.
Goslett points out that the services that clients value most from their real estate agents are accurate comparative market assessments on the value of the home; their ability to negotiate the best price for their homes and access to websites with current, updated information. “These won’t change in the year ahead.”
The various external factors that could have an exceptional influence on the property market and its growth according to Goslett are:
While Goslett says the interest rates are expected to increase in the first half of next year, he doesn’t believe that it will have any real negative impact on buying patterns.
“The interest rates will more than likely continue to steadily increase throughout the year ahead. Interest rates have been at their lowest ever for a number of years now and we are currently in a rising interest rate cycle. Inflationary pressure will dictate where this ends and it would seem that we are a long way from controlling our debt,” he says.
Areas for growth:
Talking about sectors of the property market that are ripe for growth in the coming months, Goslett says that affordable housing is now big business and it’s a market that is set to see exponential growth.
“The face of home ownership is changing at a rapid pace and I think the affordable market is going to be a massive contender in the housing sector during 2015.”
Gated communities too are still on the rise. “Security in South Africa will continue to be a major factor that influences buying decisions, one of many reasons why gated communities and estates will remain a popular choice among home buyers,” says Goslett. “Homes with lower maintenance requirements will also continue to be popular, mainly due to increased utility/municipal costs which are placing additional pressure on consumers’ pockets.”
Influence on consumer sentiment:
Consumer sentiment towards property-related legislation will also influence buying patterns in the year ahead, as will land reform and to whom it will apply.
“The current land reform legislation is geared towards farms and rural areas; however there does not seem to be a clear distinction as to how the proposed new land reform policy will affect traditional residential property.”
Affordability and access to finance:
“The rental market has seen good growth this past year, with demand also outstripping supply in certain areas close to CBDs,” says Goslett. He believes that in the year ahead, a fair number of consumers will continue with the struggle to meet deposit requirements and show the necessary affordability levels in order to gain access to finance. “I expect that this situation will continue to spur demand for rental properties, especially those close to business hubs and a wide range of amenities,” says Goslett.
He points out that in the US 65% of adults own their own home. This figure is expected to drop to around 55% in the year ahead.
“We expect to see a similar situation in South African real estate, with rentals becoming a more attractive option and in some cases a necessity for those who cannot afford home ownership.”
While there are any number of factors that could influence the property market and its performance – such as general economic trends and growth or lack thereof or demand and supply ratios in a particular neighbourhood – property remains a sound asset in which to invest.
“Over the long term, property has proven to be a solidly performing asset and should be a core component of any investment portfolio. The crux is for buyers and sellers to understand the market conditions in which they are trading and tailor their buying and selling decisions and behaviour accordingly,” Goslett concludes.