The International Monetary Fund has cautioned that there are ‘7 lean years ahead for South Africa’. This weakened economic outlook will no doubt put downward pressure on the local property market and result in interest rate hikes from around Q1 of next year.
However, the market fallout is expected to be better than post 2008/8, as the mass of distressed property and oversupply of stock that characterized the market of 2007/8 is not as pronounced. And while the market outlook for 2016 remains positive, the “boom” is over for now and it is back to business as usual. Sellers need to remain realistic with their price expectations and Buyers need to ensure they budget carefully and buy within their means.
The overall market performance of 2015 was down by approximately 7-10%, but still performed better than the period from 2009-2013. The average national housing price for 2015 was just above 1.026M, while stock levels were low with healthy buyer demand (show house attendance being higher than the 2009-2013 period). Well-priced property has been selling twice as fast the previous period, with the average days spent on the market averaging around 12.3 weeks.
The coastal regions are currently seeing good activity and balance in the market with a number of R20m+ sales while stock shortages are seeing an uptick in development, particularly in Sandton and the Johannesburg inner city. There has been strong demand in the rental market, with top end rental rates reaching highs of around R80k –R100k per month in high end, luxury areas such as the Atlantic Seaboard, Constantia and Sandton. This demand is likely to rise in the middle class areas over the next year given the economic downturn. But on the whole the property sector has remained a stable performer in the current economic climate.
The Western Cape market remained in a balanced state, with a slight drop in the market of around 10%. Stock levels remained tight with very little oversupply and some areas experiencing an undersupply of new housing. The bulk of activity came from the sub-R15M price range in areas such as the Atlantic Seaboard, City Bowl and Southern Suburbs. Although there has been a slowing down in the volumes the outlook for the coming year has remained positive with the markets not expected to bottom out.
Tourism and good governance have been major drivers of growth, with a noticeable increase of buyers from across the globe (including upcountry areas such as a Joburg) relocating to the city centre. The average time on the market is still about 30-80 days, but well-priced property is still selling within a month. The rental market in the Western Cape has remained strong with top end rentals now comfortably ranging to R100 000 and even as high as R120 000/month for a luxury home in a Blue Chip locations such as Clifton, Camps Bay, Bishopscourt, Constantia
Infrastructure development throughout Gauteng, such as the Gautrain and Rapid Bus Transit System, has had a noticeably positive influence on property. Specifically, development in Sandton has seen a significant boost in demand. Johannesburg’s inner city renewal, which includes security upgrades to areas such as Maboneng district, Hillbrow and surrounds, are creating new property hot spots to watch out for in the coming years.
There has been a strong rise in demand for sectional title property, especially around the Sandton CBD and mixed-use developments such as Melrose Arch. The rental market throughout Gauteng has remained strong, with Sandton rates reaching R80 000 to R100 000/month and Pretoria East gated estates in Waterkloof reaching as much as R66 000/month. Middle class areas such as Randburg, Joburg South/East/West, remain very active with the average prices still growing as demand for housing grows. Although a large portion of this market is dependent on mortgage loans, thus being sensitive to economic fluctuation.
Stock situation varies throughout KwaZulu Natal, but there have been no reports of vast oversupply anywhere, thus creating a market that is still well balanced. The average price for KwaZulu Natal property in 2014 was R1.485M while prices in 2015 averaged at 1.7M. Throughout 2014 the average time spent on the market was 98 days, while 2015 saw an average of 53 days, with a quicker sale time if priced accordingly to the area.
By Drew Hook