Gauteng trumps coastal prices

The high interest rates environment is expected keep property prices in coastal regions lower than those in Gauteng due to a higher degree of non-essential investment and holiday buying in the coastal markets, a property strategist said on Tuesday.“Activity levels, as viewed by estate agents in various regions, are lower in the coastal regions compared with the Gauteng market,” said John Loos, property strategist at FNB.

He added that it was no surprise, as coastal regions had a far greater component of holiday and investment buying activity, which was more sensitive to interest rates and economic cycles.

But Gauteng’s market is dominated by less cyclical and primary residential demand, making it essential for buyers to come into the market despite a higher interest rates environment.

Loos noted that property prices in KwaZulu-Natal were the weakest among major coastal cities, while in Gauteng, Tshwane was setting superior capital growth and activity levels compared to other major metros in the province.

- Tiisetso Motsoeneng, I-Net Bridge 

Don’t delay your property plans

The property market is still on track for a recovery - possibly as early as the third quarter in 2008 - notwithstanding the latest interest rate increase.That’s the view of Gerhard Kotzé, CEO of the ERA South Africa property group, after canvassing analysts and commentators in the industry.

“The general consensus is that the market will move sideways for about 12 months, but thereafter, it should start to recover and gradually build up a head of steam going into 2009,” he says.

“Interest rates will have been lowered slightly by then, pent-up demand will need to be satisfied and salaries and wages will have caught up with home prices to some extent, making property more affordable. Also, the final run-up to the 2010 Soccer World Cup will be in full swing, resulting in injections of money into the economy that will translate into further demand for property.”

“Given this scenario, the various stakeholders in the industry should apply certain strategies. Sellers should not delay. The price you receive now will buy a similar standard of property, provided the sale date and purchase date are not too far apart. In other words, the buy/sell market pricing mechanism balances out.

“For buyers the message is identical: Don’t delay your plans if at all possible because prices are continuing to rise, albeit it more slowly.”

Similarly, Kotzé says, buy-to-let investors may be tempted to wait for bargains to appear, but the difficulty is being in the right place at the right time.

“On the other hand, the rental market is recovering, partly due to the National Credit Act (NCA) which has made it more difficult to obtain bonds.

“Investors should however assemble larger deposits to reduce bond costs, be selective in their choice of property and be prepared to wait for prices to harden again before re-selling.”

Basically, he says, all stakeholders in the market should actively use the breathing space afforded by the current property market slow-down to position themselves for the next upturn. 

Cement firm upbeat about market

A leading South African cement manufacturer is upbeat about the prospects for the market, despite the fact that the recent rise in interest rates is likely to have some impact on residential construction in the coming year.Releasing its annual results, Pretoria Portland Cement (PPC) said it believes that low-cost housing projects will continue growing.

“In addition, the level of infrastructural investment planned by government, Eskom and other sectors is gathering momentum, and we therefore expect continued demand growth in the year ahead,” the company said.

It added that these views are confirmed by construction and engineering customer groupings who all talk of full order books.

As a result of positive indications that industry growth will continue well past 2010, most local cement manufacturers are busy with or have announced expansion projects to increase capacity.

In addition, Orascom, an Egyptian cement company, announced plans to establish a cement plant near Mafikeng in the North West province of by late 2010.

“Indications are that these investments will allow industry demand to be met by local producers from 2011 onwards, and this will eliminate or reduce the need for imports,” PPC said.

PPC’s Batsweledi capacity expansion at Dwaalboom is planned to be commissioned during the second calendar quarter of 2008 and should ramp up to full production by the financial year-end. Consequently, the benefit of additional cement production will be limited to the second half-year dependant on how quickly the ramp-up is achieved, it added.

In the meantime, PPC will continue to supplement any cement shortfall with an imported Surebuild product, albeit at little or no margin.

Additional cement milling capacity will also come on stream during 2009 in the inland region. In February 2007 the board approved a R604m project for a new milling facility at the Hercules factory in Pretoria.

The Riebeeck West expansion and modernisation project study for the Western Cape is progressing well but has been delayed by the environmental impact assessment and regulatory approval process.

“Whilst this delay is unfortunate, we have continued with the specification of equipment, plant layout and engineering design. Over the last year there has been no growth in cement demand in the Western Cape and therefore this delay should not have any major impact on either the project or our ability to supply the cement requirements in the province over the medium-term,” it said.

The positive market outlook, combined with incremental cement output in the second half of 2008, should enable the company to report improved performance and a strong operating cash flow for the ensuing year.

“We are on track to commission the new Batsweledi capacity at Dwaalboom early next year which will increase our output during the second half and therefore reduce the need to import. We are confident about achieving another improved performance next year,” CEO John Gomersall said.

 - Jacqueline Mackenzie, I-Net Bridge 

Top end property soars as bottom end stutters

The average price of a house in Cape Town’s lucrative property market has hit R2 311 000.But while the top end of the market is still soaring, the bottom end has taken a knock.

There were gloomy predictions earlier this year that the property bubble could burst because of the cumbersome provisions of the National Credit Act and hefty interest rate increases. But the rich have largely been protected from these developments.

According to the Residential Property Price Ranger, a company dedicated to recording property data in the Western Cape, the average price rose 7 percent from R2 157 000 in September to the present new record amount of R2,3-million.
This means house prices have generally risen 28 percent or R500 000 in a year from R1,8-million in October 2006. In the past six months 3 252 houses were sold in the greater Cape Town area, most of them at the high end of the market.The Residential Property Price Ranger’s website says despite the gloomy predictions, house prices increased in seven of 13 areas - mainly in upmarket suburbs - and decreased in six others.

Constantia reported the greatest value in house sales - R195-million for the month, up from R166-million a year ago. Big business was also reported from the southern suburbs, where R182-million in sales was achieved, up from R163-million a year ago.

Pam Golding Property director and area manager for the Atlantic seaboard, Laurie Wener, said the top end of the market was proving to be resilient amid the tighter market conditions.

“Buyers in the upper price ranges have shown little reaction to the implementation of the National Credit Act and the recent interest rate hikes.

“They also seemed to be unaffected by the recent volatility of the share market. We have seen a relatively large number of cash buyers in the market who are willing to pay between R10-million and R25-million for the right property in the right location.”

Wener said the latest Residential Property Price Ranger figures showed that prices on the Atlantic seaboard in the R10-million-plus bracket have increased well above average this year.

Ian Slot, managing director of Seeff City Bowl, CBD and Atlantic seaboard, said notwithstanding the National Credit Act, which had had a tangible effect on lower income sections of the market which were very “bond approval-sensitive”, sales continued to be strong in the luxury apartment market in Cape Town and on the Atlantic seaboard.

“In the Waterfront in particular the luxury apartment market has been amazing lately. Sales to the value of R29 914 800 have been made last month.”

Seeff area specialist for apartments in Bantry Bay, Fresnaye and Sea Point, Mel Truss, said: “The market has continued to grow in these sectors, as evidenced by recent apartment sales along the Atlantic seaboard - where previously most sales were at the R2-million to R3-million mark, now we are seeing the bulk of sales at R3-million to R5-million.

“Since the introduction of the National Credit Act there has definitely been a move to cash offers. We can certainly say that at least 90 percent of the sales we have made since then have been cash deals.”

Jeanne van Jaarsveldt, marketing and financial director of Remax, agreed that the top-end or luxury market homes have not been affected by the NCA and interest rate increases to the same degree as the lower and middle markets.

In Muizenberg and Kalk Bay sales have included four top-end properties ranging in price from R2-million to R3,3-million. Three of these required more than 50 percent bonds and the other was a cash sale.

Tony Clarke, managing director of Rawson Properties, said they had experienced the same trend within their group.

“The truth of the matter is that the Credit Act has hit the bottom end of the market the hardest as these are the people who normally have a large exposure to debt and a small net surplus income.” 

Article from Cape Argus