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Cape Town - Following a year which saw South Africa’s housing market rise to the challenge amid tough economic conditions, a number of positives stand out, says Dr Andrew Golding, chief executive of the Pam Golding Property group.
According to the Pam Golding Residential Property Index, although national house price inflation eased to 5.3% in October 2015, which is less than one percent below the September/October 2014 peak, the lower price band (below R1m) is still outperforming the national average at a notable 8.9% in October or 7.45% for the year to date.
While nominal house prices continue to rise, the resurgence in consumer inflation is, however, gradually eroding the recent recovery in real (inflation adjusted) house prices.
According to Lightstone statistics, for the 10-months from January to October 2015, a total of 151 371 homes changed hands, compared with 175 619 units for the 12 months in 2014. For the year to date, Lightstone statistics also reveal that 79% of sales comprised homes under R3m and over half (53%) under R1.5m. The average price selling price was R918 000.
"The top end of the South African property market above R10m continues to be extremely active demonstrating continued resilience and buoyancy. For example, on the Cape Atlantic Seaboard we are seeing an uptick in luxury sales, particularly priced from R20m to R30m, and mainly to Gauteng buyers,” said Golding.
“In 2016 these trends are expected to continue, against the backdrop of an economic environment likely to remain sluggish, with an anticipated economic growth rate of close to 1.5% and the possibility of interest rates inching higher during the first half of the year."
He said given the relative affordability, convenience and security of sectional title properties, together with a compelling desire to contain household costs, including municipal rates, utilities and maintenance, the trend towards such properties will continue. This is further bolstered by the capital growth appeal of sectional title homes, which are expected to continue to outperform freehold price appreciation as demand consistently exceeds supply.
“And as densification in major metro areas continues, with housing demand increasingly focused around public transport infrastructure, homeowners are likely to be willing to sacrifice space for the convenience of location, further underpinning demand for sectional title properties," said Golding.
International trends also suggest that millennials will expect work, live, play options in both urban and suburban environments, requiring a new hybrid form of a suburb which offers the amenities of an urban node but with elements of suburban life.
During 2015 the South African residential property market continued to see improvement with consumers still placing a high value on homeownership. This is despite the fact that consumers experienced increases in electricity tariffs and interest rate hikes.
While there were many prospective buyers who struggled to meet deposit requirements during 2015, those with access to finance were ready to embark on their journey towards homeownership and get into market as soon as possible, according to Adrian Goslett, regional director and CEO of RE/MAX of Southern Africa, who predicts that access to finance will continue to be tough for consumers in the New Year.
"It is highly likely that we will see further rate hikes during 2016, which will continue to put financial pressure on consumers. Rate hikes will influence affordability ratios and make it more difficult for prospective buyers to gain access to finance,” said Goslett. “While the residential property market has shown improvement, consumers who are looking to purchase property in 2016 will need to start preparing themselves now by focusing on building savings and reducing their debt-to-income ratios as much as possible.”
In 2016 he said SA will continue to see excellent growth within the affordable housing sector, as well as continued demand for homes within gated communities that offer security.
“Security in South Africa is and will continue to be a major factor that influences buying decisions, one of the many reasons why gated communities and estates will remain a popular choice among home buyers. Homes with lower maintenance requirements will also continue to be popular, mainly due to increased utility and municipal costs which are placing additional pressure on consumers’ pockets,” said Goslett.
The towns along the Eastern Cape’s Sunshine Coast have been enjoying a major influx of tourists and holidaymakers since the start of the festive season, and local agents are expecting a significant number of property sales to follow.
“St Francis Bay, Jeffrey’s Bay, Kenton-on-Sea and Bushman’s River are becoming increasingly popular and their populations more than triple over the holiday season,” said Brendon Lahana, the Chas Everitt International franchisee in St Francis Bay and Jeffrey’s Bay.
