Laurie Wener, MD of Pam Golding Properties in the Western Cape (Cape Town metropolitan) region says: “The residential property market is perennially of great interest to the public at large, and statistics and trends which are gathered from various reliable sources – mainly the Deeds Offices – are sliced and diced by a variety of commentators to project a picture of market activity.

“However, without sufficient insight and interpretation, information may prove to be confusing and even misleading. “For instance, it is frequently reported that the ‘average price in an area has risen by X% over the last quarter’. This could imply that the actual property prices have had capital growth of X%, or that the market activity may have moved into a higher price band - while property prices may in fact have remained level or even decreased, as can occur when mortgages become difficult to obtain,” says Wener.

Another example is a statement such as: ‘the incidence of cash buyers has increased by XX% over the last quarter’. This could mean that out of a specific number of buyers, the proportion of those purchasing for cash has increased, or that the total number of buyers has reduced, possibly due to a reduction in mortgage dependent buyers, with cash buyers therefore making up a larger component than before.

“Statistics published often cover a very broad price range of properties, resulting in averages being calculated from vastly varying values across price bands. Coupled with this, and at any given time, different price bands may be influenced by variable market factors. As a result, this may mean that they are not realistically reflective of the segment of the market to which the reader relates or has an interest in,” says Wener.

“A representative of a statistical bureau who was recently being interviewed on a TV channel said that property prices had risen by 12%, and in the next sentence reported that cash buyers were buying ‘properties of distressed sellers on auction at 45% lower than current market value’.

“This begs some questions:
• Does the 12% growth figure include the properties which were sold ‘on auction for 45% below market value’? If so, then it suggests that capital growth in the general market may, theoretically, be considerably higher.
• If the properties ‘discounted’ on auction were omitted, then this suggests that the 12% growth figure is inflated as not all sales in the market were included.
• Surely prices achieved – whether individually or collectively and regardless of the method of sale – establish market value? Therefore to say that there has been growth of 12% when properties are being sold at 45% below market value is a contradiction in terms and misleading to the consumer.”

Wener says the same interview revealed that it is a statistical fact that the number of Estate Agency Affairs Board (EAAB) registered agents has dropped from approximately 85 000 to 25 000 over the past two years, and that the average sales turnover has increased from approximately R2 million to R4 million per agent.

“This was attributed by the interviewee to being the result of fewer agents sharing the pie. However, consideration has to be given to the following facts. Firstly, the pie has also shrunk considerably. Secondly, and independently of market conditions, it is a statistical fact that 20 percent of the agents achieve 80 percent of the turnover and possibly, or probably, it is this portion that has survived the trading conditions and constitutes the higher performers anyway.

“For assistance with the interpretation of statistics it is advisable to speak to the principal of a reputable estate agency or an experienced agent who should also be able to provide you with suburb specific trends and recent sales date,” concludes Wener.