Residential property prices are perking up

A property sales' consultant in a foul mood phoned me this week to vent some spleen. Why, he demanded to know, do people visit show houses that are hopelessly beyond their financial reach, presumably wasting time for themselves and the estate agency person on duty in the home for sale?

Of the eight people who popped through his assigned Bedfordview home at the weekend, seven hadn't bothered to even get a ball park figure from a bank or mortgage originator about what their shopping price range might be, and one had a deposit that would never come close to securing the upmarket property. Adding insult to injury, the consultant spotted some visitors throwing his business card and marketing brochure out of the car window as they drove on to the next open home that afternoon.

These weren't the only matters troubling him. The Bedfordview property man was fairly miffed that some economists and estate agents have suggested the worst is over for the residential property market. After all, the mass of "for sale" boards in his area alone suggest it is a buyers' market, though there are few buyers who qualify for mortgages these days.

Lightstone's figures have been the most promising of all, with its latest national repeat sales figure showing house prices bottoming out at the beginning of the year and now on a "modest upward trend". Said Lightstone director Andrew Watt: "Monthly house price inflation (which tracks the month-on-month house price trend) was up 0.24% from March to April. This continues the positive trend we have been monitoring since January and appears to confirm that recent house price growth has moved out of negative into modest positive territory."

Watt said his organisation had reflected carefully on the data. "Given the volatility of monthly house price inflation, we have been cautious to confirm this positive trend, but four consecutive months of positive monthly figures gives us the confidence to confirm that house price are on the rise again," he said.  

Absa's senior property analyst Jacques du Toit said Lightstone's figures are "most interesting". He said Absa's house price index "also shows the price cycle is most probably starting to bottom".

Responding to the Lightstone data, FNB Home Loans' strategist John Loos said his index "also suggested a turning point of sorts". "Yes, I still believe we are in price deflation, but that's starting to lessen," he said, adding that his index is more bearish than others. It has eased from about -9.7% to -9.5%, which is a lessening of the inflation trend and positive growth is not expected this year and only possibly in 2010.

No-one can call the bottom of the residential property market with absolute accuracy. This is because unlike shares, the identical asset is not being publicly traded. Lightstone's data comes closest to comparing apples with apples, however the size of the sample would inevitably be smaller than those analysed by Standard Bank, FNB and Absa through their home loans' divisions.

But, as Du Toit points out: although the levels may be different, the stats are all generally indicating that we are near the bottom of the property cycle and that things are looking better ahead of us.

In short: the recovery is expected to be slow and much will depend in the medium-term on how the global economy weathers its challenges.

Many estate agency bosses are saying something similar, and that buyer activity has increased in the form of inquiries about properties and increased show house attendance, though they concede this buyer activity hasn't yet translated into sales. Banks are also slowly but surely easing up on their lending criteria again.

Samuel Seeff, chairman of Seeff Properties, sums up his theory that "the market has levelled out". "It appears as if the banks are loosening (slightly) their loan to value criteria, which should ensure that the increased demand we're experiencing now will result in more sales going through. This will serve to eliminate some of the glut of stock that we've had until now and ensure that the balance between demand and supply will move towards equilibrium at year end. As a consequence, my view is that we will see prices stabilising, firming and increasing slightly in 2010 - Roll on 2011!"

For the Bedfordview worker bee though, minor easings of credit criteria and an uptick in "activity" at showhouses don't amount to much, particularly when you consider that many people are just popping in to ease Sunday boredom.

So, with residential prices perking up and talk about the cycle turning, why don't we all feel as cheerful as Watt, Du Toit or Loos? And who is right? The man on the ground, people like the Bedfordview property consultant who is at the coalface, or the estate agency bosses and bank number crunchers?

Possible answers to these questions arrived this week in the form of Cees Bruggemans' The Rex Column. Bruggemans, chief economist at FNB, opined that "at cyclical bottoms a recovery hardly feels like one. It feels far more like a funeral". 

For various reasons, not least of all the global political imperative to create jobs, Bruggemans suggests the worst of the economic pain is over.

But he cautions that "talking recovery from very depressed levels is foremost a technical story, a numbers game". "No longer falling, or levelling out, the numbers are creeping up, though the industry survivors are mostly too bomb-shocked to notice. Things will feel numb for a long time," says Bruggemans. 

He says too that "the conventional wisdom is also caught in this numbness". The growth collapse was abrupt and deep and there are many walking wounded in the ranks, whose priorities have changed. 

In a nutshell, the message is this: the market is perking up but we are coming off a low base at a slow speed. That people are returning to show houses is a sign they are warming to the idea of a property purchase. The fact they're shopping in the wrong bracket and without any prior investigation of their financial options suggests they're still too numb to figure out a very nice home might be within surprisingly easy reach.

It seems our Bedfordview man, and others in his position, can expect many more Sundays entertaining window-shoppers and picking up crumpled pamphlets in driveways before they strike a rich seam of eager, able buyers.

Jackie Cameron is editor of Realestateweb - South Africa's fastest-growing property news site. Write to her: jackie@realestateweb.co.za, or add your views about the property market, below in the comments' section.

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responses to this article

VERY INTERESTING THAT THE PROPERTY MARKET WOULD BOTTOM AT THE SAME TIME AS THE INTEREST RATE CYCLE SO IT'S DIFFERENT THIS TIME, EH? @ssholes! by Munch on August 25 2009, 17:39 Find this comment inappropriate? Report it

PLEASE TELL ME WHERE!!! Please by Trader on August 25 2009, 17:41 Find this comment inappropriate? Report it

and all the while we await the CJ says index to be published Thats what bubblehead is waiting for. Screw these so called experts, lets see the CJ says index. He can call the bottom, yes he can ! (because he said so....) Bubblehead says its time for a bottom and a new bubble in something... . .more anything ! . .less by bubblehead on August 25 2009, 17:43 Find this comment inappropriate? Report it

Let me guess.... Written by someone in the proprty industry ? lololol by Dave on August 25 2009, 17:43 Find this comment inappropriate? Report it

Typical estate agent!!! The agent complains about people coming to look at show houses that they cant afford and wonders why people are wasting his/her time. Well, put it this way, if you werent going to do show houses, exactly what would you be doing instead? Estate agents . .more barely do any work as it is and command high commissions bordering on criminal. So stop complaining and go and get a real job, one were actual work is involved!! . .less by WTF on August 25 2009, 18:11 Find this comment inappropriate? Report it

So why does the Pr!ck not advise .... his client to put the property on auction in order that the price is determined by the willing buyer and willing seller? In all probability one will find that the seller is already in a stressed position thanks to the estate agent who originally sold him . .more the property!!!! Eish, these estate agents are cockroaches!!!!!!!! . .less by Compadre on August 25 2009, 18:45 Find this comment inappropriate? Report it

I think I see the problem Everyone is getting excited about something that is not actually happening. Prices are not turning up, not even a little bit. What is happening is that over a month period prices dropped a quarter of a percent less fast than they had the month . .more before. I know good news is hard to find but getting your knickers in a twist over this insignificant stat is a little bit on the desperate side. And yeah, bubblehead, you're right, I did promise my data ... and I will ... it's just that sometimes trying to put the world right can be soooo exhausting - there comes a time when a man just has to crack open a cold one, forget everything and put his feet up ... normal service will be resumed shortly . .less by CJ says on August 25 2009, 18:58 Find this comment inappropriate? Report it

Interesting that this author assumes that higher prices are a GOOD thing His bias is showing Ask first-time buyers what they think of higher prices? Only speculators would celebrate higher prices, not the rest of the population by Ding Bat on August 25 2009, 20:37 Find this comment inappropriate? Report it

I HOLD PROPERTIES STILL HUGELY UP IN VALUE FROM THREE YEARS AGO WEATHER THE STORM,AFTER WORLD CUP WE COOKING AGAIN by STOP WORRYING SHORT TERM,PROPERTY WILL TICK UP IN TIME on August 25 2009, 21:23 Find this comment inappropriate? Report it

Depression 1929 In 1929 they started talking about the bottom only to reach it in 1933 (So 4 years!!!) Then it took them 7 years deleveraging and a war to get it right. Nothing has changed till now, only Cees heard from his bosses that it is time to spin . .more good news. . .less by Troy Ounce on August 25 2009, 21:58 Find this comment inappropriate? Report it

HIGHER @Ding Bat...Let me know when u are selling off any of your properties for Lower returns...i presume u read this article because u are either a speculator or an investor...in either scenario, one is certainly looking for prices to go HIGHER, unless u are . .more truel y a Ding Bat... . .less by Markethero on August 26 2009, 02:48 Find this comment inappropriate? Report it

crashed? its still trending down punters! funny how I had a call from an "estate" agent who refused an offer from me 2 years ago on a property...said :" its worth much more than that offer"..! LOL....now she's begging me to take it at my original offer!! sorry, i . .more just dropped it by another 40%...... IDIOTS !! we can still drive down the market for at least another 12 - 24 months... just in time for rates to go back up..LOL, then we;l drive it down even more !! . .less by Super Duper on August 26 2009, 09:28 Find this comment inappropriate? Report it

Review of fees Its time estate agents start to rethink their game. they have 5-7 years of record income, How many of them saved in the anticipation of a slow down? Commissions of 7% excl VAT are a thing of the past, as with the financial services industry . .more maybe they should start pointing their focus to fee based income i.e time=money. This then sifts out any potential time wasters and for those that are serious buyers it is much more cost effective. . .less by Mighty on August 26 2009, 11:10 Find this comment inappropriate? Report it

Sorry, off the topic But did anyone see any responses to Ian Slot's challenge (One & Only sale)? Makes one think why so many accusations are silenced when he requested some sources or info. Back on the topic, and just a thought, but who said that the properties . .more viewed on show days are beyond people's financial abilities? When I go to view a property on show day then I do not know the asking price beforehand. And when I walk through and enquire what the seller wanted, I was often surprised at how much they think their place was worth; completely overpriced. I could still afford it and could still buy it if I was insane, nevertheless. Perhaps the business cards and brochures are tossed out because of pure disgust. Not saying that this is the case, or condoning poor buyer etiquette, but asking prices are often audacious, quite insulting actually. . .less by Etienne on August 26 2009, 11:33 Find this comment inappropriate? Report it

hey Troy Ounce in 1929 goverments raised interest rates in response to the crisis, 80 years later and guess what economists have actually learnt something about managing downturns. I gues we can compare a 1929 Merc with a Merc today to put the difference into . .more perspective. As for another thing to ponder about. If you kept on being bearsih after the bottom in 1933, you would have missed massive upside from 1933 until after the war. If you did not sell anthing in 1929 and just kept it, basically 20 years later you would have been at the same point and had 0% returns. Moral of the story is that it makes no sense being negative when markets have fallen 45%, it only makes sense to be bearish when you seel shares at all time highs. None of us can time the top and the bottom, but at least we can know when to be bullish en when bearish. Being bearish now is just plain stupid . .less by NY Boertjie on August 26 2009, 13:28 Find this comment inappropriate? Report it

Question to CJ tell me buddy, do you think it makes a difference to ones credibility on things like Property and Shares if you actually owned any of them when giving advice versus not ever having owned any of them whilst giving advice. I was just wonderdering . .more whether you'd go for golf lessons at someone who has never played golf before. . .less by NY Boertjie on August 26 2009, 13:35 Find this comment inappropriate? Report it

Idiot Bulls Please tell me why when property prices were decreasing month after month after month did you stubbornly deny it. Now that the prices have increased just ONE month, now you shout "recovery". According to you there was never a decrease in price. . .more I will wait for a couple of months' results to spot a trend. Calling a trend after one occurrence is a bit stupid. . .less by Devil's Advocate on August 26 2009, 14:09 Find this comment inappropriate? Report it

NY Boertjie I was just wonderdering . .more whether you'd go for golf lessons at someone who has never played golf before. PRICELESS>>>>>!!!! by tiger on August 26 2009, 14:47 Find this comment inappropriate? Report it

@NY Boertjie Good point; people remain bearish long after a crash, and bullish too late into the next bull run, just intime to catch the next crash. You miss most of the upside that way, and take a lot on the down side. Happens time and time again and is based largely . .more on the current sentiment, thinking the current trend will continue forever. There's much to be said for being contrarian and having balls. Which btw CJ hasn't got and so won't be giving coaching lessons any time soon. Only a spectator. When it comes to market timing, oh yeah - we are all market timers in retrospect. We are all blooming geniuses. . .less by Talking Bull on August 26 2009, 15:36 Find this comment inappropriate? Report it

ny boertjie well said by dfb on August 26 2009, 15:51 Find this comment inappropriate? Report it

CJ That guy knows squat about owning... Never owned property in his life....just pays me rent...perhaps he could give advice to tenants & renters instead of hogging the Investor Sections by CJs Landlord on August 26 2009, 16:02 Find this comment inappropriate? Report it

tenant classes/ lessons Not a bad idea CJ's landlord... we could use old CJ to train tenants on acceptable practises to being a good tenant. god knows.. we need a well trained pool of quality tenants and who better than old CJ.. What you say CJ...... buddy ! by Brennan on August 26 2009, 17:42 Find this comment inappropriate? Report it

no- bottom of the market lessons as per cj's graphs and calculations, he too will be a property owner- but only at the bottom of the market!! so he will be renting until - 2099- december 21 at 15h32. Best he keep that debit order increasing by min 10% if he want to rent from . .more me. . .less by dfb on August 26 2009, 20:17 Find this comment inappropriate? Report it

@NY Boertjie Whilst I do not agree with CJ re property, I do on the equities side of things, at least for the moment... Based on contrarian investing, surely after 40% increase in equities now would be the time to sell and not to buy? 40% increase reflects . .more somewhat of a bull market, rather than a bear one, not??? And we are nowhere near any future significant growth... What other reasoning can you provide apart from usual contrarian arguements, which cannot hold any longer, given the above increase in value, why equities will keep ticking up and ppl should go out and buy them? I can give you a few, as to why I reckon market is overpriced...And why should ppl listen to you,given that you do have a posi in equities, and therefore a vested interest in such action? . .less by Rogi on August 27 2009, 05:28 Find this comment inappropriate? Report it

Who's not feeling cheerful? Things have never been better. If I was any happier I would be on medication! by CT Landlord on August 27 2009, 08:54 Find this comment inappropriate? Report it

RE: Who's not feeling cheerful? Dear CT Landlord. It appears you are already on medication... by Daniel on August 27 2009, 12:27 Find this comment inappropriate? Report it

CJ Predicts again- shares down and Gold Down (yes I'm afraid so) Yes folks, it's sticking ones neck out time again - and good old CJ is willing to put his reputation on the line once more. Hasn't had a loser yet. Will this be the first ? Equities - the fall is sooo imminent - could even be today or Monday - I . .more can taste it, it is so close. New lows I am afraid ... a new bottom mid next year? This ones for you Brennan. I think I may have cracked the gold / Dow ratio dilemma. We are not going to a 1:1 ratio - that whole graph is on an upwards trend channel. The 7 or 8 ratio was the bottom. There's now going to be a blip up to a ratio of about 22 in the next few years. Roll of drums ... Gold is therefore GOING DOWN. Think $500. It makes sense, it's contrarian, too many are convinced gold will boom. It's going to pull a fast one on us. Who needs gold when there is deflation all around. Remember when I said that SA inflation will rise to 13% around 2016 ... THAT'S when gold will make it's move. That's when the inflation monkey will kick in as the world experiences payback for all it's excesses. That's when we could see gold at $2500, and that is when, if it feels inclined, it will make a dash for a peak low Dow/gold ratio of 3.5 ($7000 ?) - the chart certainly did the double down dip thing last time. So gold is a short term sell for the next few years. It is now all starting to make sense. . .less by CJ Says on August 27 2009, 15:41 Find this comment inappropriate? Report it

Ahh what about the gold / housing index you say If you didn't then I did. Here's a graph for the UK - http://www.marketoracle.co.uk/Article10344.html The ratio is heading for a ratio of 100 again, that I am sure of. It looks presently like it should get there next year. That would . .more mean housing at say £180,000 and gold at £1800 ($2500) - doesn't seem right though, too much gold rise too soon - exactly - which is why we will instead have a bit of a U dip like we had in 1974. Houses at £180,000, gold at say £500 = 360 ratio - there's our blip up. THEN it will continue to meander down, hitting bottom around the same time as the bottom of the housing market, say £150,000, which will also be when inflation kicks in and gold makes its move. So a Gold of £1500 ($2500) gives us the 100 housing ratio and fits in with the scenario in the post above. As I said, the pieces are starting to fit together. So in a nutshell, equities down now, maybe final low mid next year, gold down for a few years, housing bottoms in a few years time, deflation for a few years, then inflation kicks in, housing goes up with inflation, gold booms, and equities are doing a big rollercoaster thing along the way. It makes sense and it fits the charts. By golly, I think I've cracked it. . .less by CJ says on August 27 2009, 16:23 Find this comment inappropriate? Report it

@ CJ Well then you will be betting against the big players like Hank Paulson and Buffet. Paulson who earned an estimated $2.5 billion last year betting against a recovery in the U.S. housing market has just become AngloGold Ashanti Ltd. biggest . .more investor. ask yourself why? and then buffet in his "Greenback effect" report who see's inflation ahead: "Legislators will correctly perceive that either raising taxes or cutting expenditures will threaten their re-election. To avoid this fate, they can opt for high rates of inflation, which never require a recorded vote and cannot be attributed to a specific action that any elected official takes. In fact, John Maynard Keynes long ago laid out a road map for political survival amid an economic disaster of just this sort: 'By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. . . . The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose." Thats where economics and politics get murky. So you are a brave man to go against these 2 billionaires. . .less by Brennan on August 27 2009, 22:11 Find this comment inappropriate? Report it

US Debt Here is the problem, watch this video its scary http://tinyurl.com/mohxqz by Brennan on August 27 2009, 22:40 Find this comment inappropriate? Report it

But Brennan Buffet is a long term guy. I didn't say gold isn't going up - it will - just not NOW. First it will go down. That's the point. Everyone thinks the leap above 1000 is just round the corner. My lightbulb moment is that it isn't. We are in deflation now. Why . .more should we need gold. The pain is several years away when the real payback time starts. That's when your inflation monster is going to kick in. If it spirals out of control, that's when it will happen. In fact gold is at a crucial high resistance point now on the chart. It either breaks through and charges upwards, which is what everyone expects ... or it bounces down and returns to the lower part of the channel ... that is what I think it will do. It makes much more sense if we are trying to get the pieces to all come together in sync. . .less by CJ Sys on August 28 2009, 00:08 Find this comment inappropriate? Report it

CJ Why do you say we are in deflation now? Is deflation not supposed to be a long term decrease in prices over all asset classes and a increase in the amount of goods that a rand buys? by pete on August 28 2009, 10:04 Find this comment inappropriate? Report it

But I am a longer term guy than Buffet! Who says I am not a long term guy myself? You CJ are the short term guy not me. I say this because at 35 I am still young and have many years of investment left, Buffet at 79 does not have much time on his side so I definitely will beat him . .more there.. LOL I am however glad to see you are starting to see the light on this inflation problem the world is going to be facing. As a long term investor I dont worry too much about the short term ups and downs but as you know I do watch them as i find it a interesting discussion and hence my discussions with like minded and unlike minded investors around here, like you ! So I dont know when it will happen exactly but it will be when the dollar loses some major value. I am expecting it to crash and when it does thats when Gold will soar, followed by rising prices. Let me say however that the inflation(increase in money supply/ debt) is already happening. Rising prices (the consiquence of the increase in money supply/ debt) still needs to take hold. I think you realise that now.. http://www.usdebtclock.org/ . .less by Brennan on August 28 2009, 10:34 Find this comment inappropriate? Report it

Brennan's deep wisdom :) "Who says I am not a long term guy myself? You CJ are the short term guy not me." Keep repeating to yourself Brenn, "It's not timing the market, it's time in the market.., It's not timing the market, it's time in the market.. It's not timing . .more the market, it's time in the market.. It's not timing the market, it's time in the market.." .. oops - anyone else miss the downturn? . .less by Amused on August 28 2009, 13:44 Find this comment inappropriate? Report it

ahhh Amused you dont listen ....or is it understanding you lack? I buy at huge discounts all through the cycle, at the peak of the boom I was still buying at 40% below and now when everyone is under the kosh do you think I cant do the same or better? You dont want . .more to understand so you never will... . .less by brennan on August 28 2009, 14:20 Find this comment inappropriate? Report it

Talk about timing the market I saw an interesting graph recently that tracked the previous 20 yr average returns of the Dow over the years (equity increase plus dividends). There was one peak period where you would have earned 13% a year during the previous 20 years. Of . .more course, no doubt people thought "wow, I want a piece of that, I'm happy to go long term and invest 20 years". And what happened - 20 years later you look back and discover that your average return has been a meagre half a percent a year. There you have it. Even in the long term, timing is important. . .less by CJ Says on August 29 2009, 00:13 Find this comment inappropriate? Report it

@ pete US and UK in deflation - SA PPI negative - Argus food basket flat over the year. There is deflation all around and the trend in our SA inflation graph shows we will be negative CPI next year and near zero for the couple of years after that. So my . .more call is deflation for a few years, strong dollar for a year or two, gold to fall, equities to plunge, housing to keep falling ... then in 3 or 4 years housing bottoms, inflation starts to increase (maxing in SA at around 2016 at 13% ), gold makes the long awaited move up, equities rollercoaster. Cash is still king. As one wise expert pointed out recently, your dollar in the bank today can buy twice as much land in the US than it could back in 2005. With deflation it is actually growing. Compared to plunging equities and homes it's returns will be very comforting. . .less by CJ Says on August 29 2009, 00:29 Find this comment inappropriate? Report it

Deflation Thanks CJ. I also appreciate your views on the economic future. I am not sure how PPI affects inflation, but I know that the Reserve Bank attempts to keep inflation within a target range. Are you saying that interest rates (repo) will therefore drop . .more another 5-7% (to get inflation back up to the range)? . .less by pete on August 30 2009, 14:08 Find this comment inappropriate? Report it

@ Pete If wholesale prices (PPI) are deflationary, plus imported and exported commodities are in deflation mode, it seems to me CPI will follow. The long term graph shows that will also be likely. I see in the US that wages are also falling - more . .more deflationary signals from across the pond. Interest rates are an interesting one. With zero or negative inflation it makes sense the pressure will continue to be downwards. Falling house prices and falling interest costs on bonds will gradually increase affordability which is much needed. Especially as deposits will remain large as banks try to protect themselves from the negative equity of clients in the face of dropping prices. Plus lending criteria will remain tough. Normally falling interest rates will boost house prices but with the relentless dropping of prices over a number of years, plus with tough lending conditions, plus the hard economic climate, the appetite to buy a house will be greatly diminished. I am probably sticking my head out further than I should have here, but it is a scenario that makes sense and in the crazy times anything that makes sense should probably be taken note of. In my own case, if my rental's price fell 30% in the next 4 years and interest rates were 5%, suddenly the house goes from costing 3 times more to buy than rent, to costing about the same. . .less by CJ Says on August 31 2009, 09:30 Find this comment inappropriate? Report it

Deflation Thanks CJ! by pete on August 31 2009, 12:13 Find this comment inappropriate? Report it

@CJ Thank you CJ. You are so brilliant. I also want to be so clever and so brilliant as you. Please continue to let us have your wisdom and thoughts, without that, life as we know it would be worthless. Thank you CJ. by Gloria on September 01 2009, 11:28 Find this comment inappropriate? Report it

and back in the real world Petrol up tomorrow, municipal wages up, electricity up. what deflation? by dreamer on September 01 2009, 21:09 Find this comment inappropriate? Report it

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