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Cape Town - Against a backdrop of sluggish economic growth, subdued income growth, rising municipal rates and utilities tariffs and slightly higher inflation, the recent decision by the SA Reserve Bank's Monetary Policy Committee to keep the repo rate stable is good news, particularly for mortgage-dependent home owners and aspirant home buyers requiring access to finance, according to Dr Andrew Golding, chief executive of the Pam Golding Property group.
"The recovery in South Africa’s housing sector has certainly seemed to gather some momentum and although house price growth remains relatively muted, the Pam Golding Property group has seen growth in the volume of transactions and therefore activity increase year on year by more than 20% for the second consecutive year," said Golding.
The rental market is also buoyant, adding further appeal for buy-to-let investors.
"House price trends continue to be driven by property market conditions and related factors which are impacted by a combination of macroeconomic factors, the state of household finances and the level of consumer confidence.
"Certainly historically low borrowing costs, despite the 75 basis point hike in the repo rate in 2014 to date, are buoying confidence in the housing market, with banks demonstrating a somewhat greater appetite for lending," said Golding.
"There is now a shortage of stock in almost every primary market in South Africa, with plenty of buyers chasing that stock – particularly in high-demand areas such as metropolitan areas in major centres, and notwithstanding unforeseen external factors this should be the forerunner of real, above-inflation house price growth and hopefully a sustained up-cycle."
Generally speaking, correctly priced properties are staying on the market for a much shorter time than in the recent past and in highly sought after areas these properties are being snapped up within a couple of weeks at the most, after going onto the market. Over the past year attendance at show days has increased considerably, with many instances of more than one offer being made on the same property.
Golding said a factor fuelling the demand for homes is the surge in the buying power of black buyers, which has increased exponentially in South Africa, and continues to do so.
"These buyers are investing in their own homes and purchasing property across all sectors of the market and in all areas around the country. As with all home buyers, purchases are made for a variety of reasons, including gaining that first foothold into the market, acquiring a second home for leisure or investment, finding that ideal family home or even purchasing an iconic luxury property – perhaps in the country," said Golding.
Upward trend
Thursday’s decision by the MPC to keep the repo rate unchanged was welcome news as the housing market continues its upward trend, said Seeff chair Samuel Seeff.
"For the first time since the 2007/8 down-turn, sales activity is showing real upward movement, not only in the primary urban sectors, but also in the secondary coastal markets," he said.
"While the minor interest rate fluctuations over the last few years has had only a marginal effect on demand and sales, it is nonetheless important that stability is maintained. The market is now nicely balanced with strong demand and tight supply. Where conditions were overwhelmingly in favour of buyers, the pendulum has now shifted in favour of sellers."
Buyer urgency has grown, there is limited supply of property and, we are consequently seeing real activity in the market.
"Our branches report that not even the cold winter kept buyers at bay and they continue flocking to show houses in record numbers. Multiple offers are becoming common place with sellers getting close to and, in some instances, more than their asking price," he said.
Where it took about 20 weeks to sell the average home post 2009, it now takes about two weeks, according to Seeff.
"The slow economic and job growth and inflationary pressure though, remain worrying factors. While activity in the property market is defying the economic trend, it remains a tight balance that can be disturbed by interest rate swings," he said.
Having said this, Seeff maintains that despite the 75 basis point hikes already this year, the mortgage loan rate of 9.25% remains at an historic low.
"Bear in mind that during the 2005-2007 boom period, the rate ranged between 10.5% and 13%. Home owners and buyers though are cautioned to start preparing for a cycle of interest rate hikes over the next year," he said.
Economists predict at least a 100 basis point hike, likely to be introduced in small increments of around 25-basis points over the next few quarters.
- Fin24
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