Why people are moving to the Garden Route

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Mossel Bay was South Africa’s Town of the Year in 2007. There, I said it. I am bragging with my new hometown. All you Gautengers, eat your heart out. I know you’d love to live here down by the sea. How do I know that? Oh, it’s quite simple. I used to be a Jo’burger myself until very recently.

One of South Africa’s big daily newspapers, Die Beeld, recently reported that The Garden Route (Southern Cape) is currently experiencing a major immigration from the major metropolitan centres in South Africa. Of course, it isn’t called the Garden Route for nothing. The scenery is breathtaking, the quality of life is great and the pace is laidback. It’s perfect for someone who wants to escape the breakneck pace of city life.

The whole region has been experiencing fantastic economic growth during the past five years. In fact, the real economy of the Eden towns, which include Heidelberg, Riversdale, Mossel Bay, George, Oudtshoorn and Knysna, has been growing at an average of more than 9% from 2003 to 2007. Compare this to the real economic growth of the Western Cape and Gauteng during this period, which increased at an average of 5% during the last 5 years.

Furthermore, at a time when the general South African property market is experiencing a crunch, the Garden Route is still doing somewhat better than the national average. Nationally, about 83% of properties were sold for less than their initial asking price during the first quarter of this year. In the Garden Route this figure stands at 72%. George, the biggest metropole in the area, is still showing average house price growth of 27% year-on-year, even though the number of sales reduced by 38% year-on-year. Mossel Bay is still showing average house price growth of 16% year-on-year, even though the number of sales reduced by 35% year-on-year. Sedgefield shows similar figures. Knysna is the only town in this region that shows negative house price growth.

This all shows that, even though you might have your property on the market for somewhat longer than before, the Garden Route is still a very good place to be if you’re a property owner. Talk to one of our knowledgeable agents to help you find your dream property.

*Image from gardenroute.com

Affordability: addressed

I recently read the following extract of a news article:

“According to the latest Absa house price index, released on Thursday, South African house prices in the middle segment of the market slowed to a nominal 6.8% year-on-year (y/y) in April from 7.8% y/y in March, taking growth to an eight-and-a-half year low. This is also the fourth consecutive month of single-digit growth in nominal house prices since a growth rate of 11.2% was recorded in December last year.

In real terms, house prices in the middle segment of the market dropped by 2.5% y/y in March 2008, compared with a decline of 0.9% y/y recorded in February, based on headline CPI inflation. “This was the biggest negative real year-on-year growth rate recorded in house prices since May 1997, when it was at a level of 3.4% y/y, based on nominal price growth of 5.7% y/y, and a headline CPI inflation rate of 9.5% at the time,” noted the researchers.”

In essence, what they are saying is this: the value of your house currently appreciates only at 6% per year. Compare this with a normal investment account at a bank that can earn you between 9% and 11%. Now this is before you bring in the effects of inflation. If you consider our current inflation rate, the value of your house is actually reducing.

Not very good news, is it? Times are tough and in these times people try to get rid of those second and third investment properties that became so unaffordable after all these interest rate hikes. Similarly, most potential new entrants to the property market are now discouraged because of the same affordability constraints. Of course, you still cannot drive down any street in any neighbourhood these days without being bombarded with the boards of the same estate agents, all trying to sell the same properties belonging to the same sellers at the same prices to the same people who aren’t buying for almost exactly the same reason – affordability.

It hardly seems to make any sense, yet they all still do it. We believe in doings things different when those methods have proved themselves ineffective. That is why we are using innovative solutions to address the affordability issue. We are still selling high-end, spacious, luxury properties all over the Garden Route in the Southern Cape applying our innovative techniques.

Why don’t you talk to one of the experts Terblanche Property Solutions? We’ll help you capitalise on those hard-to-sell property investments… even in this market.

A buyers’ market

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Look, if you are a seller, you’re probably not going to like this post. In fact, you probably haven’t had too many things to smile about the last few months. However, if you’re looking to buy property as an investment, read further by all means.

Nominal house price growth slowed to 8,7% year-on-year last month, the lowest growth recorded in almost nine years, according to the latest Absa house price index. This was a further reduction from the 9,9% recorded in January and the lowest growth since the end of 1999 when house price growth was 9,3%. Higher interest rates, the effects of the National Credit Act and pressure on housing affordability were all factors influencing the continued slowdown. In a sense, we find ourselves right in the middle of a perfect storm.

Some of the experts believe that house prices could start declining in real terms if inflation continues to rise and nominal house price growth continues to slow down. The residential property situation is in line with other interest rate-sensitive parts of the economy, such as the motor vehicle sector. Retail sales are also showing negative growth. Still, in South Africa we have so much more to be thankful for than our American and even some of European counterparts.

If you are a property investor this may be a good time to invest because price growth is not strong and should pick up over the next three to five years. However, if you are an ordinary home buyer, bear in mind that this is more of a buyers’ market than a sellers’ market. Buyers are selective, taking their time to consider their purchase and looking at a wider range of options. For the first time in a while buyers are spoilt for choice. Many are only putting in offers on well-priced properties, while others are negotiating price. Increasingly, sellers have to price more realistically and competitively and these properties will find buyers quickly.

At Terblanche Thomas Property Solutions we believe sellers in the top-quality estates can still find willing buyers, provided they price realistically. There is also still a lot of activity in other trend-setting areas like the townships and entry-level areas where properties are priced from about R400 000. Buyers now have a wider range of options and should take their time before putting in offers. While it is harder to obtain finance these days after the NCA, putting down bigger deposits will definitely speed up the process considerably.

As always, our doors are open. If you’re a seller or a buyer in the Garden Route, call or e-mail us for relevant advice.

*Gatty Images

What can you expect from the property market in 2008?

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Since last year, the phenomenal growth experienced in the South African residential property market started to slow down. We have experienced double-digit growth for a number of years now and many thought the party would never stop. However, all indications are that our property market is poised for another year of slowing price growth.

Does this mean that the outlook this year for the average property investor is decidedly one of doom and gloom? Bear in mind that Tito and company increased rates eight times over the last 18 months. These increases have resulted in mortgage repayments increasing by about 25% since 2000. Couple this with price growth that will probably be in single digits for the first time in seven years and it looks like this year might not be so happy after all if you’re a property owner.

The thing with the slowdown in the price growth is that we live in a country with an inflation rate expected to peak at about 8% this year. If the value of your house increases by only 8% or 9%, it is clear to see how that kind of growth will not give you anything in the line of real growth.

Luckily the news is not all bad.

If you are a potential buyer, you will be happy to know that the slowdown in the growth of house prices is giving your salary an opportunity to catch up for the first time in seven years. Despite some fears, South Africa has also largely been spared the fallout from the sub-prime crisis in the USA and United Kingdom. This means that our banks will still be happy to provide loans to potential home buyers.

Potential buyers must bear in mind that house prices – while not growing by much this year – are not likely to fall either. Furthermore, the supply of housing onto the market is also decreasing as new building plans being passed is continuing to slow down. This should help to support both price growth and rental growth.

If you are a property owner, you will be happy to know that rentals and yields are on the increase for investment property owners. The rise in interest rates and the increase in repayments are making potential buyers jittery and they are showing signs of rather waiting it out in the rental market. Compared to previous years the property market has slowed in terms of price growth and demand.

Our view is, despite the current high interest rates, the slowing price growth is an opportunity for buyers to get into the market. At some point – probably towards the end of this year – interest rates will start to fall and prices will start to climb at an increasing rate again. Will you be ready by then or will you be forced to watch house prices sky-rocket making them ever more unaffordable?

Remember, generally it doesn’t get easier to get into the property market. It only gets harder… and more unaffordable. Talk to one of the experts at Terblanche Thomas Property Solutions for advice tailored to your individual needs. Mossel Bay and the Garden Route offer some real investment gems – if you know where to look.

*Copyright: Stefano Roddaro, from stock.xchng

Time for a sale

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Hi there,

Every now and then the property market – like any other market or store – has a sale. Some call it a “correction”, others talk about “low growth levels” and some others warn of an impending “property bubble”.

According to Absa Bank’s latest House Price Index, house prices in South Africa were up by 14,5% in nominal terms compared to 15,2% in 2006 and 22,6% in 2005. However, compared to recent years, house price growth was only 3,8%, year-on-year in November (5,3% in October). Property analyst at Absa, Jacques du Toit, said this is “the lowest real growth since the 4,2% recorded in December 2002″. The average house price is now R964 000, according to Absa’s measure.

What does this mean for you? Bear in mind that many economists are expecting the growth in house prices to taper off even further this year due to scary things like the National Credit Act, rising interest rates etc.

Well, for one this means you’ll probably get properties now for bargains you wouldn’t have seen in the last 4 years. Properties are investments with a lifespan of a number of years. If you make the right investment now, it will pay off when you sell. Of course, rental income generally is also growing again as more and more people in South Africa are forced to rent because they cannot afford to buy. This is also true in Mossel Bay and many of the other towns in the Garden Route.

Profit is made when you buy, not when you sell. Prices are growing slower now, which means that it’s becoming a buyer’s market again. The smart investor will talk to his property advisor now to find those gems. Talk to a knowledgeable agent at Terblanche Thomas Total Property Solutions for advice on finding those smart property investments now.

Don’t follow the herd.

*Copyright 2001-2008 Architel