According to Alliance Group Chief Executive Rael Levitt: “For most property players, the past year has been first and foremost about short term survival”. Levitt believes that the outlook for 2010, while still mild, is far better than 2009 which saw many people tightening their belts to deal with the weak economy and growing unemployment. “In 2010 people will start spending more as the stock market continues to rally and the economic outlook improves. Keeping the show on the road over the last 18 months of turmoil has been a true test for many developers, brokers and banks, while in 2010 the challenge will be to refocus on the long term and what the post World Cup period will bring. We must not forget that 2010 may well be a tale of two halves,” he continues.
“The first half of the year until the 11th of June will see our country showcasing its beauty and its assets – to an accumulative audience of some 30 billion people. One cannot underestimate the impact of the World Cup. Our cities will very shortly be hosting the world’s most spectacular global event. The World Cup will be a chance to showcase South Africa, and, despite high levels of crime and a still shaky economy, South Africa will prove the sceptics wrong. For the first time the world will see that South Africa is in many ways closer to Argentina and Malaysia than it is to most African states. Preparations for the world cup have already given a boost to the economy through infrastructural spending.”
“As football fans from around the world descend upon us, we must remember that the economic headwinds will still be strong and unemployment, above 20%, is still alarmingly high. The property market, still burdened by debt, faces a long, hard slog, in fact our view is that the property market is indeed in a period of a slow, weak and dull recovery. Whilst the world cup will boost sentiment, and likely cause a bounce in high value residential properties, it unfortunately won’t be a magic pill to quickly relieve the downturn”.
Levitt predicts that in the first half of the year the property market will experience larger property liquidations and insolvencies than ever experienced in the country. “A sweet spot may emerge for estate agents and auctioneers if buyers are buoyed by positive World Cup sentiment, but sellers who are mildly distressed will accept realistic prices. I truly hope that certain agents don’t create hyperbolic euphoria around the World Cup and create a situation where sellers start asking unrealistic prices thinking that soccer fans are heading to South Africa on property shopping trips. This will kill sales”.
“The second half of the year may well be more challenging and whilst we don’t believe that there will be a major post World Cup hangover, reality may well set in for certain property players. House price growth threatens to be limited for the next year because of the damaging legacy of the last two years,” says Levitt. “The last decade led to large house price inflation and as banks have become relatively sober in mortgage lending, the complications left by the last decade’s property boom will be with us for a while.”
With regards to the auction industry, Levitt believes that auctions will grow as further new entrants join an increasingly competitive space. As a result of this growing competition which is, according to Levitt “marketing itself and thus the industry”, auctioneering will see further growth in 2010 as the industry gains more and more acceptance as a first choice method of sale. Furthermore, distressed property sales will still be coming to the auction floor for most of the year.
“We will see private investor appetite growth in commercial property and when our banks further loosen credit lines we will see even more growth in auctions as a means of buying. 2010 will also see record numbers of the larger listed property funds selling their smaller properties as smaller investors get back on the acquisition trail. The smaller investors who were battered by the tight credit market were some of the biggest sellers in the market only six months ago — but are now also looking to buy again,” he concludes.