Tag Archives: Industry update
As the cost of living continues to rise and eat into retirement savings, senior citizens in many of South Africa’s established suburbs are unlocking some of the value in their large family homes – not by selling them, but by renting them out, and then becoming tenants themselves in smaller, easier-to-manage properties.
“This emerging trend makes good sense for older homeowners whose own families are grown and who want to scale down anyway because of security or home maintenance issues, or perhaps because they want to enhance their retirement savings,” says Harcourts Real Estate Richard Gray.
“Such owners typically have a very small mortgage or no mortgage to pay any more and can achieve substantial rentals for their three- and four-bedroom family homes in sought-after, central areas, especially in the current phase of the market where rental demand is strong and rising.”
They get to keep their real estate assets and if they’re lucky, he says, they may even have a granny flat or cottage on their property where they can stay for “free” while earning rental income on the main dwelling.
“Alternatively, they generally target rental apartments and townhouses in secure complexes, where the maintenance is taken care of and they can lock-up-and-go as they please. And the rentals they pay for these units are usually more than covered by the rentals they are receiving for their own properties, leaving them extra money to live on or to put into their savings if they are still working.”
This is just another illustration, Gray says, of how home ownership can help to create wealth and provide consumers with advantageous financial options throughout life.
“Indeed, the fact that many baby-boomers can now describe themselves as being ‘freetirees’ who are able to do what they want with their lives is largely due to the fact that they became homeowners early in life and worked hard to pay off their bonds as soon as possible.”
Meanwhile, the new trend is also advantageous for young families who are desperately keen to live in established suburbs with good schools, shops, entertainment, sport facilities and public transport all right on their doorstep – but can seldom afford to buy a family home in these areas.
“Renting in a central suburb and saving time and money on transport gives them a much better chance of saving a deposit to buy a home of their own in due course.”
In a year when most of South Africa’s large real estate groups experienced an encouraging improvement in the residential property market, Harcourts has turned in a particularly notable performance, with the total value of sales in the group having shown a year-on-year increase of 29% at end-November.
According to property data company Lightstone, the estate agency industry as a whole achieved an 18% year-on-year increase in the value of sales, with 8% accounted for by higher homes prices and the remainder being due to a higher number of units sold.
“Harcourts results this year are thus well above-average,” says CEO Richard Gray. “Our average sale price increase across the group was 6,1%, so the bulk of our 29% turnover increase obviously came from a huge increase in the number of homes sold.”
Industry-wide, he says, the primary reason for more homes being sold in the past 12 months was an improvement in lending conditions and an increase in the banks’ appetite for mortgage loans. “In addition there is strong and growing demand now in the middle segment of the market, as evidenced by the stock shortages that are beginning to emerge in many popular areas.”
However in Harcourts’ case, says Gray, the trend was strengthened by the addition of 12 new offices to the group’s national network this year, as well as significant growth in agent numbers. “Agents are being attracted to Harcourts by our leading-edge technology offering, the Harcourts Training Academy and the fresh brand. The group is also attracting younger agents than the industry average for these reasons.”
And finally, he says, Harcourts has grown its market share in many of the areas in which it operates during the past 12 months, thanks to its leadership coaching and training, which is creating a strong group of business owners and principals with the knowhow and motivation to expand their businesses.
Currently the average selling price being achieved by Harcourts agents is R960 000, compared to an industry average of around R900 000. The group says the greatest demand it is experiencing is for homes in the R700 000 to R2m price range, which have accounted for 80% of total sales value in the past 12 months.
“A year ago, there was an oversupply of property, but this has largely been sold, especially in the metropolitan areas, and we are actually experiencing a shortage of homes to sell in many of the most popular suburbs,” he says.
“Demand is to a large extent being driven by the increasing number of first-time buyers coming into the market and freeing-up existing owners to upgrade or just move elsewhere. However, there has also been much activity in the past year at the upper end of the market, with high net worth individuals deciding that the time was right to acquire multimillion-rand properties before values really start to climb again.”
And, Gray says, the growing stock shortages will undoubtedly drive prices higher over the next 12 months, despite substantially increased activity on the part of developers. “Building input costs are high and – according to Absa – it is currently about 37% more costly to build or buy a new home than it is to purchase a similar pre-owned home, so even when a developer does add new stock to a suburb, it is likely to be priced at more than the surrounding homes and so have no depressing effect on local prices.”
However, he says, Harcourts does expect sales, and thus price increases, to be constrained in the coming year by affordability issues. “The current low interest rate cycle is of course aiding affordability, and the financial institutions do appear to have an increasing appetite for mortgage lending. “But household debts remain high, and this is limiting the ability of the banks to lend because existing debt commitments reduce the percentage of disposable income that prospective buyers have available to cover the monthly repayment on a home loan.
“And those buyers who cannot qualify for the home loans they want then either have to postpone their home ownership plans while they reduce their debts and save up a big enough deposit, or lower their sights and buy a cheaper property. Meanwhile, Gray says, the banks have no desire to see new homeowners find themselves in a negative equity situation – as so many did following the 2009 recession and property price collapse – so they remain conservative in their property valuations when granting home loans, and this is also acting as a brake on price growth.”
After battling a strike, arson, aftershocks and insurance hassles, two property owners have accepted that the central Christchurch blueprint has ended their 18-month fight to rebuild. Rob McCormack and Peter Greene have spent $1 million trying to replace the Madras St headquarters of McCormack’s real estate business, Harcourts Grenadier. McCormack said he was “absolutely gutted” to learn their site was in the blueprint’s green frame just as they were finally making progress.
“But I’m philosophical now. I don’t have a choice,” he said.
“We happen to be in the way of the frame. We don’t want to be an obstacle. Some people will have to take some pain, and that’s us.”
When the Grenadier building was wrecked in the February 2011 earthquake, the pair aimed to have its $8.9m, four-storey replacement up within a year.
It would have been the first office building rebuilt in the central city. They immediately struck setbacks securing insurance and had to design the building for extra strength. McCormack estimates he was spending 12 hours a week in meetings and negotiations, on top of his normal business. Then their specially sourced 11-metre piles were blacklisted by Auckland port workers because they had been unloaded by non-union labour during a strike. After the piles arrived three months late, the specialist piledriver was torched by arsonists and needed parts from Canada. Then the blueprint came out and their property was within the frame.
“At first I couldn’t absorb it,” McCormack said.
“How much bad luck can anyone have – an earthquake, losing your building, not being able to get our piles, some bugger torching it, and then the Government goes and takes your land?”
Now the pair have a new fight on their hands – compensation. They have met the Canterbury Earthquake Recovery Authority (Cera) to discuss a payout for their property and are optimistic they will get back the $1m spent on demolition, consents, piling, engineers, architects and project management, plus the $1.8m they estimate their land is worth. McCormack is unhappy they will not be offered back their land later.
“They (Cera) gave us a very, very good hearing. We’re not trying to make money; we only want what is fair.”
He will be “extremely disappointed” if the negotiations do not result in an acceptable price.
The Press, Christchurch 28/8/12 5.00am, Reporter: Liz McDonald
It was a special night at Harcourts’ annual conference awards dinner as 1000 dinner guests packed the SKYCITY Convention Centre to witness a very unique moment in the history of the Harcourts Hall of Fame inducting not one, but two people.
Lynette and John McFadden from Christchurch, accompanied on stage by existing Hall of Famer, Brian King, were the new inductees for 2012. Brian was met with an emotional reaction as he touched the couple’s shoulder guiding them to the stage where they were greeted by current Hall of Fame members.
In real estate since 1994 and 1996 respectively and now business owners of the very successful Gold Real Estate Group, neither Lynette nor John had any idea that they were to be inducted.
“The Harcourts Gold Franchise symbolises everything that is special about these two wonderful people – second best just does not cut it, if you are going to do something you do it well, there is only one space to be in, and that space is called ‘outstanding’ – in every corner of the business. Testimony to this is that Papanui has been top office based on revenue in group four, for 7 of the last 8 years and either 1st or 2nd top office in the very competitive Christchurch region. Not to mention the top franchise based on revenue per sales consultant in the country, 3 years in a row,” said Gilbert Enoka, General Manager Harcourts International in the introductory speech.
On the 1st of April 1997, armed with share passion, determination and a commitment to succeed, John, Lynette and two colleagues Bruce Newman and Judy Curnow entered into the partnership beginning Papanui Realty Limited opening the doors on 14th April 1997. This was the first of many offices in the “Gold” brand now consisting of Papanui, New Brighton, Redwood, Parklands, Strowan and Accommodation House was to come later, Mr Enoka explained,
Mr Enoka found this induction both an honour and a privilege. “Sometimes life affords you opportunities to do something special for special people. This was one of those occasions,” he commented.
Lynette and John were accompanied by their sons Harry and Louis, parents Gary and Evelyn Schwass, and Lynette’s sister and good friend Elise who flew up on the day from Christchurch, unbeknown to them to celebrate with the new inductees of Harcourts’ Hall of Fame 2012.