A Quarter of Contradictions
Considering the announcement of a technical recession and ever-rising fuel costs pinching consumers even further, there can be no doubt that last quarter has been a tumultuous one. It is unsurprising, then, that the property market would yield some interesting contradictions during this period.
“The third quarter of 2018 has produced some interesting trends in the housing market. House prices continue to grow slowly despite the economic outlook during this quarter. Yet, while sales figures show minor growth, the number of sales is on the decline, with more sales being proportioned to the middle price bands than ever before,” says Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett.
Over the period of July - September 2018, Lightstone Property recorded 52,217 bonds cancelled during the third quarter – a stabilisation from the low figure of 39,649 that were cancelled in the second quarter. A total of 40,092 bond registrations were recorded at the Deeds Office, totalling an amount of R43,555,805,000. While this might translate into a 5.4% increase in the amount of bonds registered in the previous quarter, this has slowed from the much larger growth of 19.4% between Q1 and Q2.”
“What’s more, the number of transfers (both bonded and unbonded) recorded at the deeds office between July and September dropped by 2.3% from the second quarter to 60,269 transfers in the third quarter. Of these transfers, a total of 30,226 freehold properties and 14,473 sectional title units have been sold countrywide (*these figures exclude estates, farms, and land only transfers). This translates into a 6.9% drop in the number of freehold properties sold in the third quarter, and a minimal 0.3% increase in the number of sectional title units sold. This decrease in sales is not unexpected during a quarter of negative economic growth which placed many consumers in financial straight jackets,” Goslett explains.
Fewer Sales at Slightly Higher Quarterly Returns
Yet, while the number of sales have decreased quart-on-quarter, house prices have shown some minor growth this quarter. Lightstone revealed that the current national median price of a freehold home now sits at R1,047,673 which translates into a 4.3% growth since the second quarter. Likewise, the national median price of a sectional title grew by 0.9% since last quarter to R1,020,330. The average bond amount granted during this period also saw an increase of 1.3% on the R1,072 million recorded for the second quarter to R1,086 million in the third quarter. “The average active RE/MAX listing price for this period amounted to R2,588,279.91, with a 51.79% increase in users to our site. It seems that the market is still active, but at the higher price points where consumers are less affected by the economic climate,” Goslett suggests.
Bad News for First-Time Buyers
According to Goslett, bonds for R400,000 and below have a long-standing history of being the largest segment of the market. However, the gap is slowly starting to close. “In the third quarter only 31.3% of transfers fall within this price range, which is 2.9% lower than the figures from the second quarter. Catching up to this segment, 24.2% of bonds were priced between R400,000 and R800,000, up by 0.9% from the second quarter. At 1.2% higher than last quarter’s figures, 24.3% of transfers were priced between R800,000 and R1,5 million. Showing slightly lower growth of 0.6%, 15% of transfers were between R1,5 million to R3 million; and, transactions over R3 million grew by a humble 0.2% to account for 5.2% of all bond registrations for the third quarter. These figures point to a market that is shifting beyond the reach of entry-level buyers and in favour of the middle-income buyer,” says Goslett.
These quarterly figures reflect a year-on-year trend. According to BetterBond statistics, there has also been a rise in the percentage home loans granted for amounts greater than R1m in the past 12 months, currently 41%, which is up from the 39% in the previous year and 38% two years ago. By contrast, though, BetterBond also reports significant declines in the percentages of bonds being granted for below R500,000 – the price category traditionally favoured by lower-income first-time buyers.
Evidence of this shifting market is conservatively reflected in Lightstone data which reveals that of the total transfers, a total of 7,611 (12.6%) were first-time registrations and 52,658 (87.4%) were repeat sales. This is a 1.7% shift from last year’s split in favour of repeat sales.
“Given this shift, it seems that the economic conditions during the third quarter have made it increasingly difficult for first-time buyers to enter the market, while the middle-income price bracket continues to show growth. This possibly can be attributed to downsizing from within the high-end market. But – since minor growth was still reflected in these segments, and a drop was only reflected in the category of bonds for below R400,000 – an additional explanation is that some were able to move up on the property ladder by selling their entry-level homes for a profit,” Goslett concludes.