Sellers, not legislation, nor rising interest rates or estate agents, was cited as an unnecessary major contributor to the residential property market's slowdown.

While it was an undisputable fact that the South African economy had become entangled in the global credit crunch, its effect on the market along with rising interest rates was "being largely overstated", says Jeanne van Jaarsveldt, marketing and finance director of RE/MAX of Southern Africa.

"Undeniably, the biggest sheet anchor on the movement of residential property right now is overpricing and this can be substantiated by the number of sales being concluded after negotiation on price."

According to the FNB property barometer, for the first quarter released earlier this week, the percentage of properties sold at less than asking price was 83% and 82% in the last quarter of 2007.

Van Jaarsveldt insists that it is important that sellers realise the slowdown in the South African property market was a direct result of financial fundamentals of a global nature and not part of a national conspiracy engineered by the Reserve Bank, the commercial banks or estate agents.

To blame the Reserve Bank was unfortunate as it was only exercising its appointed role of controlling inflation through the traditional tool of interest rate adjustments. It was also unfair to fault other market influences, such as the state, banks and estate agents. The reality was that South Africa, just as other international economies, had been snared into the global credit crunch, which was creating uncertainty and grinding down market confidence.

"In New Zealand we have seen residential sales plummet by more than half in the past month over March of last year while Britain's annual rate of house price growth in the first quarter of 2008 was 2,2%, down from 6,9% at the end of 2007. House prices slowed even more sharply in Northern Ireland where the annual rate of appreciation fell from 24,2% to –3,4%.

"Sales have also fallen in the US with prices flattening out while in Australia that country's national estate agent body heaved a sigh of relief almost audible enough to be heard in South Africa after its Reserve Bank held rates steady this month after hikes in both February and March which left home owners reeling from the accumulative effects of the increases."
Van Jaarsveldt urges both sellers and buyers to maintain perspective of the market and particularly it's strengths as opposed to exaggerating its weaknesses, which had become overly fashionable. Of importance, and this only applied to the South African market, was the continued emergence of the black buyer.
"Some commentators believe this source could run for 20 years before a burnout, but the importance of this feature is to understand that its former momentum has only been briefly stalled and will resume once affordability begins to improve among state employees."
Also pertinent, even in the current slowdown, house price growth was still increasing, admittedly of a slower nature. Sales in the lower end of the market were also still active, but to van Jaarsveldt, the biggest indicator underpinning a recovery was the lack of new building taking place.
The pace of new residential developments had slowed markedly with many developers at their wits end trying to successfully mix the cost of new building land and materials with affordability. Further shrinkage in new unit supply was inevitable and this, perhaps more than any single feature, would fuel second hand stock prices unrealistically when the market turned.

Property24 2008/05/05