Global downturn affecting all sectors of the property industry in South Africa

The downturn in global property markets is now hitting South Africa where real estate agents report a significant slump.

The first signs of an increase in failed property sales are emerging. This is because buyers cannot secure funds, according to mortgage company Ooba. 'We have seen a number of offers to purchase falling through of late, because potential buyers are not able to get the finance they need after they have had their offers accepted," said Manager Jenny Rushin.

As buying property becomes more difficult and various other markets feel the pinch of the slow economy, the legal industry is also being hit hard. Firms are finding that work had halved compared to the same period last year as a direct result of the slump.

'We hear daily of more and more firms retrenching staff. It is becoming increasingly difficult for people to buy property with the current rate hikes and the lending criteria of banks is also contributing to the slowdown in the industry,' said Jacques Esterhuyse, a director of KSE Attorneys in Cape Town.

'Property is definitely not the flavour of the month anymore and although we have an enormous housing shortage in the Western Cape, developers and other role players are not developing or buying land as people aren't qualifying for home loans. It is also very expensive for any developer to back land for future development at the current interest rates,' he added.

Berry Everitt, managing director of the international property group Chas Everitt, said the volume of residential sales was down with an estimated 30% less units being sold than this time last year.

High interest rates are adding to the downturn. However the decision by the Monetary Policy Committee to leave the repo rate unchanged at 12% is seen by property professionals as the first, but small, step toward a property market recovery.

RE/MAX finance and marketing director Jeanne van Jaarsveldt expects little effect on property sales but believes it will lift some of the clouds hanging over property and introduce a much needed rebuilding of confidence in property ownership, especially among investors.

'The coupling of still-too-high interest rates and tight credit restrictions will continue to hamstring first time buyers, but the news will smooth some investor fears, particularly adventurers in the lower end of the market,' he said.