Property fundamentals & relationships remain important in 2013

Peter Gilmour, Chairman of RE/MAX of Southern Africa, gives his perspective on the South African property market during 2012 and his insights for the year ahead

While the real estate market continued to recover during 2012, and both sales volumes and property prices showed a gradual increase, the criteria that South Africa’s financial institutions expected people to meet in order to qualify for mortgage loans remained onerous. This resulted in many buyers not being able to obtain the necessary finance to purchase a property, says Peter Gilmour, Chairman of RE/MAX of Southern Africa. “Despite this challenge, 2012 was a solid year for real estate in South Africa.”

Gilmour points out that high debt-to-income ratios and a poor savings culture are the major reasons why many South African homebuyers have struggled to obtain finance.  “South Africa only has a domestic savings rate of around 20% of GDP, compared to other emerging markets like China which has a domestic savings rate of around 50% of GDP. High debt and poor savings reflect negatively on affordability levels, which has held back the market and slowed down recovery. For this to change in 2013, South African consumers will need to focus on clearing their debt and starting a savings programme to ensure their ability to secure home loan finance in the future,” says Gilmour.

Even though the property market held some challenges in the year gone by, Gilmour notes that there were a number of positive events that will have a great impact on the market in the years ahead. He says that a significant move was the change of management of the Estate Agents Affairs Board (EAAB) from the Department of Trade and Industry to the Department of Human Settlements, which is being headed by Tokyo Sexwale. “We have every confidence that this change will have a positive effect on the industry in 2013 and we look forward to new era in the real estate business that is synonymous with good governance and transparency,” he says.

Added to this, Gilmour also points to the large numbers of agents who continue to qualify with NQF4 and NQF5 certificates - an effort which he says will result in the continuous increase in the level of professionalism in the industry. “Furthermore, improved procedures by the EAAB will result in more agents obtaining their certificates to operate in a timely fashion,” he says.

So what does RE/MAX of Southern Africa see as the big issues for property in 2013?

“We certainly see another very interesting year ahead,” says Gilmour. “The more things change the more they stay the same. Despite all that has changed in recent years and all the technology advances that have assisted real estate professionals, the fundamentals of being successful remain the same.”

One of the most important fundamentals in business is relationships. Gilmour says that relationships have always been important, and will continue to remain a vital component of business success in 2013. “For sales professionals, 70% of housing consumers still choose an agent due to some form of personal relationship. While the percentage of homebuyers that find their agent online has increased substantially, technology will never be able to replicate or replace a personal relationship.”

Just as relationships form a key element of the property buying and selling process, so leadership is key to a successful real estate business. Gilmour says that good leadership is still paramount to agents and will largely determine which brokerage companies they associate with. “Strong principled leadership will continue to characterise successful companies in the year ahead.”

Gilmour is optimistic about property sales and house prices in the year ahead. “As investment in businesses and infrastructure increase, there will be a gradual increase in employment which will lead to increased demand for both rental properties and property to buy.

“Home prices are expected to continue their gradual rise in 2013, especially in the high demand areas and price brackets, while interest rates are expected to remain low, therefore presenting buyers who have cash and can qualify for mortgage finance with a great opportunity to invest in a home at a good price.”

He adds that due to the limited access to finance, it is expected that the rental market will continue to grow rapidly in the year ahead.

Buying patterns will also start to be more closely linked to the rising cost of living as buyers base their purchasing decisions on living costs more so than ever before. “As prices of petrol, electricity and the like continue to rise, buyers will be looking to buy functionally – closer to schools, work and lifestyle attractions. Buyers will also be looking for other cost-saving mechanisms in the homes they buy, such as solar heating, proper insulation and other green and energy saving features.”

Gilmour concludes by saying that overall, he expects 2013 to be a year of measured improvement in the real estate market. “While the growth in real estate in the year ahead may not be substantial, it will certainly provide opportunity for buyers, renters, agents and real estate companies to improve their situations and benefit from the relative economic stability that South Africa has to offer.”

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