PROPERTY: Golding Admits Tough Conditions
Recent Western Cape Business News
Characterised by at least a 50 percent fall-off in the volume of sales, an extreme scarcity of bank lending finance and, as a generalisation, a marginal fall-off in pricing, the past year has seen extremely tough trading conditions for the property industry - all of which conspired to leave companies in this sector competing in a market which halved overnight, said Andrew Golding, CE of the Pam Golding Property (PGP) group in Cape Town recently.
“All companies have had to adapt to these conditions and we have been no different. Since the market started to turn downwards more than 18 months ago, PGP has managed to reduce its overheads by more than 30 percent. This included some retrenchments and natural attrition in terms of agent numbers, amounting to close to 20 percent reduction in our permanent staff count and a 25 percent reduction in agents. This is seen against the backdrop of a residential real estate industry where more than 50 percent of registered agents who were present 18 months ago are now no longer in the industry. And depending on which statistics you believe, those numbers may even have dropped by more, supposedly from a high of 80 000 agents two years ago to somewhere in the order of 25 000 agents currently.
However, while these circumstances have been challenging they have also afforded the opportunity to make the business more efficient and certainly more focused on its core business. In addition, through our own strategies and efforts, as well as the attrition in the market, there has been a significant increase in market share. There has also been a flight to quality in terms of agents and so a number of agents who perhaps thought that in the good times it was sensible to go on their own or to start new businesses, have found the going tough and have been prepared to return to the safety of PGP. As such, we have managed to retain our top agents as well as recruit a number of top agents from other companies throughout the county.
In addition to this, I believe that one of the other reasons for our success this year is the fact that we have stuck rigidly to - and in fact reinforced - our best practice marketing and administrative measures, strategies and resources which have been in place for some time. We do believe that the sole mandate process is the preferred and most effective way of doing business and I think our results show beyond doubt that in fact we are able to achieve higher prices for sellers on a sole mandate basis than the far less manageable open mandate system.
In the Western Cape, in the Cape Town metropolitan areas, PGP has managed to survive and sustain itself through prudent business management and the sensible allocation of funds in terms of marketing, agent training and recruitment. Highlights have been the sustained sales of properties in the very top end, mainly on the Atlantic Seaboard, to both local and overseas buyers. When interest rates were relatively high, we saw the number of distressed sellers increase - and then decrease when interest rates reduced. We saw development construction prices plummet, however this had little effect on the ability to develop due to the difficulties in terms of end-user finance. Other trends that emerged included that fact that a shortage of schooling is preventing people buying in some areas with the Southern Suburbs of Cape Town an example of that. Security is more important than ever and areas with poor security record lack of demand. In the Boland and Overberg, despite the difficult trading conditions, the region has performed very well, and is the one region which managed to exceed its sales turnover budget for the year-to-date, with Stellenbosch and Somerset West in particular the star achievers. However, the coastal areas where a large percentage of properties are second homes were most affected by the economic climate.
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