The State of the Property Market
Real Estate, Home Loans
The State of the Property Market
Our CEO, Harry Nicolaides, has just returned from the Century 21 Europe and Africa Masters conference held in Prague over a period of 4 days and which was chaired by the CEO of Century 21 (Global) Rick Davidson.
We would like to share some of the insights on the current state of the market as shared with the Masters and Rick Davidson as we believe we have relevance and may be qualified to speak on the topic seeing that we represent the world’s largest real estate brand. With 8000 Century 21 offices in 73 countries and with successful sales for the 2011 year to date (8 months to August) totalling 829 000, it is fairly simple to identify trends. Property as an Investment:
Real Estate Franchising:
Globally, there seems to be a trend that the holding of property in an investment portfolio is being favoured again. Interestingly, it is the investment in property as such and not in shares of listed property companies that is being favoured. This is not surprising as investors experience risk and non-yielding investments in cash due to the Eurozone financial crisis and the massive volatility in shares listed on the stock markets around the globe. Investors are seeing a benefit in the fact that the performance of a property investment they make is in their control and not in the hands of asset managers, portfolio managers or traders. This coupled with the fact that most consumers are now wiser in evaluating property investments as a symptom of the property crash which started in 2008 and, understanding that property will always appreciate in the longer term if for no other reason than building material and labour inflation, has resulted in the favourable trend back towards property investment.
Financial institutions have saturated the consumer market with smaller credit loans and instruments (credit cards, vehicle finance, overdrafts etc) and not home loans to ensure their own growth and sustainability. Now they are experiencing that the consumers are in fact not spending more and are not reckless in their spending habits with these facilities offered to them. This resultant of this is higher administration costs for the financial institutions to make the credit loans available to their clients and at the same time not experiencing the return they envisaged. Home loans are less costly to administer and do not require a high degree of micro-managing. Also, they can be secured by a tangible asset and we believe that it is just a matter of time before financial institutions favour home loans again.
Inflation, as a factor on its own, is becoming more and more relevant in the cost of construction of new homes (labour and materials inflation) with an effect that there is less and less new housing and residential development projects undertaken by developers. As such, and due to market demand from consumers that have stayed away from buying homes since 2008, there is a trend that shows that existing residential property prices seem to have stabilised and in fact starting to show growth again.
The effects of the massive drop in sales that industry has experienced on a global scale since 2008 has made many independent estate agencies realise that the only way to sustain their businesses is to associate themselves with a reputable brand. The main reason for this is brand awareness to consumers, the share in the collective of knowledge, systems and resources, and the fact that moving forward estate agents entering the market will always gravitate towards branded companies.
Property remains a safe investment and will always show growth in the short to longer term. It is imperative that there should be a direct property investment (not via shares in listed property companies) in any balanced portfolio of an investor. For consumers that are not investment orientated, an investment of a primary residence for them and their family has many benefits including growth in their asset worth which can be unlocked at any given time and, it can serve as an inheritance to their children on passing.
Century 21 South Africa remains committed to become the real estate agency of choice and we invite all buyers and sellers and real estate professional who are interested in a Century 21 franchise to contact us at their convenience. They will experience our new attitude of being “Bolder, Smarter, Faster”.
, Real Estate