Signs point to a better year ahead for property
The past year has been a trial for homeowners, buyers and many in the SA real estate industry, but there are better times ahead, says Gerhard Kotzé, MD of the RealNet estate agency group.
“We believe market sentiment will improve substantially after the mid-year elections, which will settle a lot of local uncertainties about the political and economic direction that SA will be taking for the next few years. By then the Brexit issue and US/ China trade war that are currently causing global uncertainty and volatility in the financial markets will hopefully also be resolved.”
Meanwhile, he says, many local market indicators are already positive and the most astute buyers and investors are purchasing now, while prices are still relatively constrained and sellers are still willing to negotiate, because they believe that the tide has already started to turn.
“Three positive indicators in December, for example, are the large drop in the petrol price, a return to positive GDP growth (2,2% in the third quarter) and an increase in the SA Chamber of Commerce Business Confidence Index for the third month in a row.
“Billions of rands are also already in the pipeline to boost local business development and employment creation after this year’s Presidential summits, and we expect that these pledges will start to bear fruit very early in 2019.”
Looking at the real estate sector itself, Kotzé notes that it appears from Lightstone data to have gained about 77 000 new homeowners a year since 2015, while the private sector supply of new formal homes in municipal areas totalled only about 30 000 a year over the same period.
“And the effect of this imbalance has been to underpin the demand for existing or pre-owned homes and the upward movement of prices (albeit very slow) as the pool of stock for sale steadily declines.”
What is more, he says, the Absa homeowner sentiment index, which reflects the percentage of survey respondents with positive sentiment regarding property market conditions, remained at a very respectable 72% in the third quarter of the year, although it was down from 73% in the second quarter due to consumer concerns about the question of land expropriation without compensation, the economy being in a recession in the second quarter, and continued political uncertainties.
“Even more encouraging is that 75% of the survey respondents were positive about property investment, and that 67% remained positive about the benefits of buying a home rather than renting one.”
Kotzé says that in keeping with this upbeat mood, developers have clearly taken the view that property demand will continue to expand. “The number of residential building plans passed in the first nine months of this year was 8,3% up on the same period of 2017, while the value of plans passed rose 5,9%.
“The amount that is expected to be poured into the residential property market as these plans come to fruition over the next 18 to 24 months is at least R43bn – and that’s a prospect which I’m sure even the most bullish commentators on our sector will agree is pretty cheerful, especially since housing construction is also a major employment creator.”