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How the South African property market compares to the US

Chris Pflueger, Regional Vice President of Franchise Sales at RE/MAX LLC talks about the US property market and how it compares to South Africa


Chris Pflueger leads the Franchise Sales Directors and Franchise Sales Departments for Owned and Managed Regions in the US. He oversees a team of more than 20.

This month, Regional Vice President of Franchise Sales at RE/MAX LLC, Chris Pflueger, visited South Africa to share some of his knowledge with the Broker/Owners of RE/MAX of Southern Africa - the leading RE/MAX region outside of North America.
 
When asked about emerging trends in the US property market, Pflueger says that there is currently a decrease in property sales in the US, which is due to a lack of inventory. “At the moment, demand for property in the US is vastly outweighing supply as people are apprehensive about moving. Many homeowners in the US have mortgages with very low interest rates, in some cases just over 2%. With the current rate above the 4% mark, homeowners are reluctant to let go of their home and highly favourable low rate. This has resulted in far less properties making their way onto the market,” he says.
 
Pflueger notes that the shortage of available properties on the market has led to an increase in building activity in the US. “The building of homes has had to increase in order to keep up with the growing demand for housing. In addition, the tax benefits and incentives that were once there for buyers purchasing existing homes are now falling away, so more and more buyers are opting for newly built homes,” he says. “Unlike here in South Africa where I believe finance can be hard to acquire, finance in the US is relatively easy to obtain and interest rates are highly competitive, which has brought first-time buyers flocking to the market. While there has been moderate growth in house prices in the US, prices are affordable, which has also assisted many buyers to get into the market for the first time.”
He adds that much like the property market in South Africa, US homes that are within the affordable price range are moving quickly. “While we have seen a huge uptake in the luxury property market, it is the affordable or entry-level housing bracket that is outperforming all others. Homes within the affordable range are selling within days with multiple offers on each transaction. Single family residences are the most common in this kind of market,” says Pflueger.
 
According to Pflueger, the improving economic environment in the US and unemployment levels of just 6.4% has meant that the amount of distressed properties in the US market has decreased with less and less distressed homes entering the market. “In fact, at the moment the focus within the US market has shifted from the distressed property market towards luxury properties. This just shows the vast improvement in economic conditions that we have experienced over the last few years,” says Pflueger.
 
He notes that foreign investment is sucking up the inventory in the luxury home market in the US. “Affluent investors usually buy luxury cars, property and property outside of the country, because they know that these will offer them a good return on their investment over the long term. There is particular interest by foreign investors in well-known areas such as New York City, San Francisco and Miami as these are the areas that have a lot more media exposure. Other areas are gaining popularity as more investors visit the country and see what is on offer,” says Pflueger.
 
He concludes by saying that with the recovery experienced within the US economy, favourable interest rates and demand for property outstripping supply in most areas, one thing is for certain - confidence in real estate is back.


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