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Residential property market predictions for 2020

Dec 30 2019 15:05
Carin Smith

There still are several concerns for the South African property market, most notably the threat of ongoing power cuts, poor foreign investor outlook and slow economic growth, according to Adrian Goslett, regional director and CEO of RE/MAX of Southern Africa.

"I remain confident in the local property market and believe that we are near the bottom of a downward cycle that is poised to start a long-term corrective journey as we head into 2020," he predicts.

Two trends in 2019 which Goslett expects will continue in 2020 are a move towards smaller properties in secure or safe environments, and larger homes taking considerably longer to sell than in the past.

"I predict that, provided no further threats to our economic growth occur during the year ahead, the local property market will remain more or less stable in 2020, reflecting marginally higher rates of house price growth and higher numbers of transactions," says Goslett.

"I believe the luxury market will continue to feel the pinch within this tight economy and the majority of transactions will continue to fall within the affordable price ranges."

The New Year will start off with a market which remains oversupplied in most areas, according to Samuel Seeff, chair of the Seeff Property Group

Price growth is expected to remain flat in the 4% range at best and sellers will need to keep their asking prices market-related or risk not attracting buyer interest.

He explains that during 2019 the low to mid-market to R1.8m (R3m in some areas) has performed well, supported by the low borrowing costs and favourable mortgage lending conditions.

In contrast, the R10m-plus upper-end market is "almost dead" compared to three years ago, in his view.

"The market above R10m, which comprises of buyers with discretionary money who do not have to buy, has remained largely in a holding pattern, waiting to see how the economy and political environment unfold," says Seeff.

"They remain cautious given that property is generally a 20 year investment and they want to see visible and significant change in the economy and political situation before committing."

The upside to the market, he points out, is that it is one of the best times to buy and Seeff expects this to remain the case during the early part of 2020.

Dr Andrew Golding, chief executive of Pam Golding Properties, agrees that, with household finances under pressure for the foreseeable future, the focus is likely to remain on affordability, value-for-money and cost saving – for example transport and utilities – for the bulk of the market,In his view, while there will still be "pockets" of activity and price growth, the performance of the national housing market is likely to remain subdued. Supply is slowing in response to weak demand, with fewer new houses and sellers keeping or removing homes from the market.

Demand seems to be slightly stronger, especially in the price band below R2m. Furthermore, due to many young people eager to buy their first home, developers are responding with a marked shift in new housing stock towards sectional title homes, according to Golding. He points out that this trend is also a result of the shortage and cost of land and mixed-use developments offering a live, work, play lifestyle close to places of work.

This has been a key driver behind the shift in housing in South Africa from freehold suburban homes to mixed-use precincts and developments, and the rise of shared, third spaces.

To Golding the recent introduction of micro-units in the Cape Town CBD and surrounds is a response to strong demand from first-time buyers who want a lock-up-and-go lifestyle and to enjoy downtown living. He says there is a strong demand for more affordable homes in CBDs around the country.

So-called semigration (from other parts of the country) to the Garden Route, KwaZulu-Natal and the Boland region in the Western Cape is ongoing, says Golding. There are also signs that semigrants, who initially rented, are beginning to purchase homes. So, while the semigration trend may have slowed to some extent, it is still having a positive impact on the property market in areas where they have relocated.

"Congestion and the deterioration in affordability appears to be the primary reasons that semigrants began looking beyond the Cape metro market for homes along the Garden Route and KZN," says Golding.

Lastly, Golding says, apart from the wake-up call from load-shedding, increasingly people are looking to add energy and water saving features to their homes to reduce monthly utilities costs and enhance value.

In his view, this is likely to become a long-term trend which will gather momentum in the years ahead.

"We anticipate this will also become more widely adopted in lower income housing as there is a growing realisation that green homes can be more cost efficient to run," says Golding.

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