Sandton residential property remains a top performer

If you are among the people who believe that the 2009/2010 downturn in the property market is still affecting the more affluent suburbs of Johannesburg, and that they require further time to recover, you are misinformed. This is the view of Ben and Adriana Cilliers, franchisees for the Rawson Property Group Sandton franchise.

Cilliers and his agents have, in the last year, grown their turnover by 70% and if more stock was available they would, without difficulty, he says, be able to double the number of homes that they process.

“Occasionally,” he said, “we have as few as ten homes on our stock list. This makes it necessary to spend a great deal of time canvassing for stock, but as a result of our growing reputation, this has become far less challenging.”

Despite these difficulties, said Cilliers, he is confident that the market, which has thus far proved quite buoyant, will continue to thrive over the coming years. He will be looking for ten new agents and he is currently in the process of expanding and upgrading his 100 m2 offices on 11th Street, Parkmore.  The new premises will have 450 m2 floor space and will be contemporary and chic.

Cilliers said that several factors set the Sandton market apart from most suburbs in South Africa. One of the major differences is that over 80% of the sales concluded are done with cash purchasers, while the few buyers who do apply for bonds are virtually always successful. Applications for mortgage finance through this franchise are nearing a 100% success rate, and Rawson Finance, the Rawson Property Group’s in-house bond originators, are largely responsible for this. 

To a far greater degree than is usually experienced in a residential market, said Cilliers, buyers now have to face the fact that they are likely to find it difficult to replace their homes at a ‘reasonable’ downgraded price. Some, too, especially those over the age of 60, may have to accept that, as the bond award criteria are now more stringent, they will probably no longer qualify for a bond. It has to be recorded, however, that Rawson Finance have recently secured an 80% bond for a foreign buyer who was unable to produce any South African pay slips and, having never lived here previously, had no credit record in South Africa.  This, said Cilliers, shows the great advantage of working with a competent bond originator.

Certain owners today, added Cilliers, are aware that if they choose to rent rather than to sell they can generate excellent additional revenue each month, often while they themselves rent elsewhere at a lower price. A good example of this could be a rental property recently listed at R98,000 per month, for which enquiries are streaming in. The owner of this property will probably rent elsewhere for half of the rental amount.

The on-going demand for Sandton homes has, as would be expected, pushed up prices in all areas.  In the traditionally affluent area of Morningside, for example, where average household incomes are between R51,000 and R67,000 per month, prices have appreciated, in one year, by 15%.  Even the smallest sectional title unit now comes onto the market at R1,5 million and the average price of sectional title units is R4,8 million. Properties in gated estates in Morningside now, on average, sell at R3 million or more and freehold properties at R5,4 million.

“To give another example, in Sandhurst,” said Cilliers, “the popular price bracket for sectional title units is now R1,8 million to R3,2 million and most freehold homes are selling in the R12 million to R15 million bracket, making this one of the most expensive areas in South Africa.  This franchise has on several occasions also listed homes here between R25 million and R50 million.”

Cilliers said that any accurately priced Sandton home will sell within three to five days – an almost unprecedented situation in South Africa for homes in this price bracket. Some have found buyers within 24 hours of coming onto the franchise’s list, and a recent sale was concluded within three hours of a property coming onto the market.

The questions now are: will this boom last? Are prices now so inflated that this bubble is bound to burst?

Cilliers does not believe that this will happen.  As he sees it, although a slight ease off between now and the end of the year is likely, demand will ensure that prices will continue to rise by at least 8% to 10% per annum – and in some areas higher – making any purchase in Sandton a good one and leaving behind it ‘the usual disappointed pack’ of those who missed the boat through not reading the market correctly.

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