SA Property Review - Looking back at 2006
Jack Trevena, MD of bond origination company BondExcel, says that the one of the biggest influences on the property industry in 2006 was the reversal of the downward cycle in the interest rate. "On a global scale," says Trevna, "the price of a barrel of oil touched $70, and for the first time since 1976, the world stared down the barrel of a gun. The property market in South Africa was not immune to the ripple effect of the oil price through the world's economies."
From a price growth perspective, the residential property market continued to slow down in 2006, says Jacques du Toit, Senior Economist, Absa Group Economic Research. "House price growth came in at 15,2% on average, compared with 22,7% in 2005. Pressure on the affordability of housing as a result of high price growth in previous years, as well as the higher interest rates since June last year, were the most important factors leading to the lower price growth."
Despite the price growth decline, the property industry remained resilient. "The 2006 year in terms of the property market will always be remembered by industry professionals as the year where it was, 'as good as it gets' concerning the speed at which property sales took place," says Linda Erasmus, CEO of Fine & Country.
Dr Willie Marais, president of the Institute of Estate Agents of South Africa (IEASA), has a different view. "The biggest surprise for us all was that the market cooled off quite dramatically as from the beginning of 2006. We all thought it was going to be a soft landing, but looking back the landing was not as soft as we thought it should be.
Marais says the industry was shocked by the dismissal of the Estate Agency Affairs Board (EAAB) members and the subsequent charging of one of them for fraud. Another shock to many agents was the substantial increase in the Fidelity Fund Certificate fees and EAAB exam enrolment fees, but it was welcomed by the IEASA to ensure that only people serious about the business will enter into the industry.
"The announcement that the national qualifications will come into being during 2007, is a milestone for the industry," says Marais. "The Institute has fought for this for more than 20 years and the national qualifications had been approved in 2004 already.
"Political issues also impacted the industry, and the proposals for a moratorium on property sold to foreigners, and the redistribution of land, affected sales to foreigners."
Bill Rawson, Chairman of Rawson Properties, concurs, "The big shock of 2006 came at the beginning of the year - with the announcement of a moratorium on foreign property buying in South Africa. The proposal - dropped shortly afterward had a marked impact on the sale of property to foreigners after the announcement was made public.
"A pleasant surprise came from Trevor Manuel's Budget Speech in February, when he announced a large reduction on transfer duty. This had a far-reaching impact on home ownership in the sub R1 million bracket, as it attracted a large amount of new buyers to property.
Principals and individual agents who have failed to pay their taxes on time are now likely to find that the Receiver has attached their commissions.
"It might have come as a surprise to estate agents when the Receiver of Revenue announced that transfer attorneys will have to submit the tax numbers of any agency principals and their agents, who were involved in the sale of a property and will benefit from the transaction, on a new transfer duty application form," says Rawson. "This means that principals and individual agents who have failed to pay their taxes on time are now likely to find that the Receiver has attached their commissions."
"One of the biggest events that affected the property market in 2006 was the interest rate hikes. In total, the prime lending rate was increased by 2% over the course of last year. In the current scenario, the average homeowner - at all economic levels - will be able to maintain his/her monthly bond repayments provided that they cut down of a few of their lifestyle 'trimmings'," explains Rawson. "However, the hikes might have forced certain developers with major commitments to cut back or even bale out of projects over the past few months."
Another big event was the long overdue investigation into'" the laws governing the South African property industry that finally got under way at the end of last year. "Various representative bodies made submissions to the Department of Trade and Industry on improving the laws governing property transactions in the country," says Rawson:' "The point of the discussions was to get away from the continual barrage of criticism levelled at the Estate Agency Affairs Board and work towards setting up a new system which all operating in the residential property sector will find satisfactory."
Rali Mampeule, Director of Chas Everitt, Midrand says that 2006 was a watershed year for the industry in terms of transformation. "Some of the significant events included the signing of the property charter by the Minister of Public Works and the Nedbank Property Professional of the year accolade being awarded to yet another black property professional. FNB and EAAB launched the new school of the Real Estate Industry, with the board announcing a new syllabus for the agents. The market is also being re-balanced due to interest rate hikes and the increase in sales from the emerging market as per FNB barometer report."
Courtesy Agent Estate Agency Affairs Board