External Factors and the Real Estate Industry
11 November 2012
1. The demographic environment:
1.1Cultural diversity trends and developmentsPage 3
1.2Demographics of own area, vs. national demographics and trendsPage 3
2. The economic environment:
2.1 The current economic environmentPage 3
2.2 Socio-economic factorsPage 4
3. The political environmentPage 4
4. The technological environmentPage 5
5. The competitive environmentPage 5
6. The legal environment:
6.1 Regulations pertaining to property ownershipPage 5
6.2 Regulations pertaining to land use controlsPage 6
6.3 Other rules and regulationsPage 6
The real estate industry is hugely affected by external factors, which have the effect of either having a positive or negative impact on us as real estate agents. When the economy is good houses sell and buyers are able to qualify for bonds. When the economy is in a downturn then houses stay on the market for a lot longer. Buyers are more reluctant to take the plunge and buy property. Repossessions increase and banks often become more reluctant to grant bonds.
1. The demographic environment
1.1Prior to the repealing of the Group Areas Act the residential housing market was segmented by race. Each race group was legally only allowed to stay in certain areas and neighbourhoods.
After the repealing of the Group Areas Act and the democratisation of South Africa after our first free and fair elections for all races in 1994, different race groups and ethnicities started living together in the same neighbourhoods for the first time.
With South Africa being welcomed back into the international community we also now have more clients from around the world.
This has also resulted in a major paradigm shift for estate agents – from serving one race group previously we are now dealing with clients from every race and ethnicity from both South Africa and around the world. To be successful and effective, estate agents have had to learn to be sensitive to, and understand, different cultures and their customs. Buyers and sellers have also had to learn to be more tolerant towards the different cultures and norms of their neighbours.
1.2The demographics of my “farm area” are representative of the national urban demographics and trends.
2. The economic environment
2.1 The world economic crisis has also negatively impacted on the South African economy and this had had a direct negative impact on our housing market.
Due to cut backs and layoffs many homeowners are finding it difficult to meet their bond commitments and as a result many homes are being repossessed by the banks.
Buyers are also experiencing difficulties in obtaining bonds from banks one of the main reasons being that South African banks appear to fear further repercussions from the global credit crisis and continued job losses (up to 400 000 before the year end)
House prices have continued to fall. Absa's senior property analyst Jacques du Toit said house prices dropped further in nominal terms in June, by 4,4% year-on-
year, while in real terms, prices were down by 11,1% year-on-year in May. But the residential market is expected to improve early in 2013
Mortgage stress has increased from 55 000 in the second quarter of 2011 to 155,000 in the second quarter of 2012. Severe mortgage stress, where bondholders are over 4 months in arrears, has almost doubled in a year and increased sharply in June to over 72 000 home owners from 55 000 in the first quarter.
Despite the lower interest rates there are more sales in execution than ever before. Currently there are approximately 4 500 houses per month which are being sold forcibly...