Post-election rebound anticipated for SA’s residential property market
The generally market-friendly election outcome will in all likelihood create a degree of certainty and stability and go some way towards addressing the issues currently affecting confidence in the South African economy – and as a consequence have a positive effect on the South African residential property market.
“While It is anticipated that, in the wake of the favourable election outcome, the residential property market will rebound, in reality, any significant recovery is only likely to materialise in the later stages of the year after the seasonally quiet winter months,” says Dr Andrew Golding, chief executive of the Pam Golding Property group.
“Furthermore, while it is fair to say that the post-election environment is likely to be better for the property market generally, a number of specific questions arise, including how the land reform question will play out in terms of policy amendments or variations and also whether or not other market-friendly reforms are introduced.”
“It is also worth noting that casting a general market view over the entire market is often not necessarily advisable or accurate – as different provinces, regions, cities and sectors perform differently. For example, there is a shortage of accommodation for students and retirement developments in different parts of the country. As a result, activity is likely to be brisk in these market sectors despite the subdued conditions in the broader national housing market.”
With household incomes likely to remain under pressure in the short term – with continued petrol price hikes (including the introduction of a carbon tax in June) – and with a large percentage of renters and buyers coming to the market for the first time, the lower end of the market is likely to continue to hold up well relative to other sectors of the market. Smaller sectional title properties will also perform better as a result since this sector is often favoured by students, first-time buyers and down-scalers.
“These sectors of the market would also be those that would benefit most from a rebound or turnaround in the economy. First-time buyers are typically most sensitive to prevailing economic conditions and are a strong potential source of demand for the market. In areas where market price corrections have improved the perceived affordability of a property, it seems time on the market is declining and buyers are showing a willingness to purchase.
“For example, Cape Town remains the country’s top-performing market. The Mother City is seen as a truly global city with a growing international profile and long-term appeal, while technological innovations such as fibre optic connectivity are placing it on a par with its international counterparts. It is also becoming a hub for corporate accommodation as international blue-chip companies have set up office in areas such as the V&A Waterfront.
“This is a micro market because of its unique geography with world-class scenery including mountains and a pristine coastline, plus its location ensures limited availability. Cape Town house prices continued to grow strongly in recent years, even as the rest of the South African housing market cooled in response to the tepid economic growth rate. This was in part due to the semigration trend which saw people move to the Cape. As this trend naturally slowed, this prompted a correction in Cape Town house prices, in turn resulting in buyers seeing value return to this market across all sectors”.
“In Cape Town, the City Bowl and Atlantic Seaboard were the first to see a correction in house prices – the first in the last 20 years – undoubtedly because these had risen the most in these areas. Now that prices in these areas have adjusted, these suburbs may well be the first to show signs of a turnaround as buyers perceive renewed value in this sought-after market,” says Basil Moraitis of Pam Golding Properties.
“This has also presented a significant opportunity for the savvy buyer who wishes to acquire a strategic asset on the Atlantic Seaboard.
At the same time, it makes sense that Gauteng and KwaZulu-Natal would recover before the Western Cape, as these markets have been well-balanced for several years now, so already reflect current prevailing economic conditions. On a further positive note, Gauteng appears to be experiencing an influx of younger, potential buyers and rental tenants attracted by this major economic hub.
“In Johannesburg East, in recent months a number of sellers, mainly in the price bands around R2.7 million and R4.5 million mark are choosing to rent instead.”
“Buying opportunities abound in the current market, with some capitalising on the medium and long-term benefits offered through buying in a new development which includes features such as excellent security, lifestyle, energy-saving and ‘green’ features such as grey water recycling, heat pumps, modern design and the ability to buy now and pay later, as well as prices which are VAT inclusive with no transfer duty payable,” says Dr Golding.
“Buyers are advised to pay attention to value in relation to what’s on the market. Buy the home that offers the best in relation to location and requires the least building interventions, also proximity to schools and shopping centres. Sellers are advised to ensure their home stands out when competing with the homes for sale in close proximity.”
Source: Pam Golding Properties