From a high in the 2003/2004 period, cash sales steadily declined as a percentage of total sales over the next five years. However, this trend started reversing in the period 2006/2007 and cash sales of full title and sectional title properties rose to 33 per cent or 1 in 3 sales during 2008/2009. 35% of all full title properties were cash and 30% compared to 30% of all sectional titles. In addition, a considerable 35% of the total Rand value of all transactions accounted for, were cash sales.

Dieter Deppisch, who heads property data research at SAPTG, highlights the introduction of the National Credite Act (NCA) in June 2007 as a catalyst for the decrease in the ratio of bonded sales to cash sales. “As expected, the introduction of the NCA and subsequent tighter lending criteria has driven cash sales upward as a percentage of all sales,” Deppisch confirms. “Many people who could obtain financial assistance for their property purchases in the past are now excluded. According to the largest bond originator in South Africa, only 1 out of 2 (50.5%) potential buyers applying for bonds are currently being approved.”

Other reasons for the rise in cash sales as a percentage are, predictably, related to the current financial crisis. “With repossessions on the rise the fortunate few with have sufficient liquidity are picking up bargains at auctions,” Deppisch observes. “Property is also an increasingly attractive asset class for investors disappointed by recent poor returns in the equity market and other investment classes. Property, while no get-rich-quick-scheme, is being favoured as a ‘safe haven’ that will yield healthy returns in the long term.”

Deppisch also believes the trend is being magnified by the growing numbers of estate agents that are responding to the market downturn, tight lending criteria and high bond decline-ratio, by actively targeting cash buyers.