Auction floors across the country have revealed that since the beginning of the third quarter of 2009, asset prices have risen and frozen commercial and residential property markets are now quickly thawing. So says Alliance Group Chief Executive, Rael Levitt. “Today’s news that South Africa’s economy has moved out of recession and has recorded positive growth for the third quarter of 2009, has been experienced firsthand by us and there has been a sharp downturn in distressed residential sales since June,” explains Levitt.
The seasonally adjusted real gross domestic product (GDP), which shows an annualised rate of 0.9% growth compared with decreases of 7.4% and 2.8% in the first and second quarters of the year, reveals that the property market will slowly claw its way back to good health. As the host nation of the FIFA Soccer World Cup, we are already experiencing a bounce in optimism and thus property values,” says Levitt.
A recent report released by the Alliance Group showed that in the third quarter there were some strong signs of increased sales activity in commercial and residential property but that the sales market is still far quieter than a year ago. According to the report, bank’s stricter lending guidelines have constrained the market as have increased concerns about tenants. According to Levitt: “Investors who can raise financing or have access to cash are now looking for value in anticipation of a rebound in commercial and residential property values over the next 12 months.”
The report also shows that there has been a bottoming out of sales confirmation rates over the last eight months, with a marginal decrease in the reserve sale price variance. “Both these indicators suggest an improvement compared to early 2009,” says Levitt. Overall, while there appears to be increased activity in the market, commercial property sales at auctions performed well below August 2008 figures just before the international credit crisis began.
Illustrative of how quickly sentiment has changed is the view of Levitt who was a self-confessed bear regarding commercial and residential property market at the end of 2008. “I have changed my mind,” he now says. “I have moved from deeply bearish to optimistic. “At the very least there will be a short-term squeeze on capital values, but South Africa will see a big bounce in 2010”.