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Property sector pins hopes on Ramaphosa to boost weak market

Dec 29 2017 17:30
Carin Smith

Cape Town - While property sales in Cape Town increased in 2017, Johannesburg experienced a slowdown, according to Adrian Goslett, regional director and CEO of RE/MAX of Southern Africa.

“Despite plenty of stock available on the market, there is a disparity between what sellers in the current market want for their property and what buyers are prepared to pay,” explained Goslett.

“Even with a slower market, Gauteng still accounted for the lion’s share of property transactions during this year and Johannesburg will continue to be the country’s economic hub.”

Demand in the Western Cape has resulted in property price growth outstripping other regions of the country.

Looking ahead to 2018, Goslett said ratings downgrades by major credit rating agencies could see the Johannesburg market slow further, with finance likely to become more expensive.

Ramaphosa effect

Lew Geffen, chair of Lew Geffen Sotheby’s International Realty, expects the property market in 2018 to show swift and significant improvement on the back of Deputy President Cyril Ramaphosa’s election as new ANC president.

Samuel Seeff, chair of the Seeff Property Group, meanwhile said the property market has shifted notably over the last 18 months as fall-out from the country's weak political and economic climate, poor growth and credit downgrades continue.

"Where it was a sellers’ market until early 2016, we have seen a progressive shift in 2017, which has manifested in lower demand, rising stock levels combined with a decline in buyer confidence, flat price growth and deals taking longer to conclude.

"The outcome is that we head into 2018 with a buyers' market for most areas, even some Cape locations," said Seeff.

Of concern to him is that there is still a lag on the sellers’ side of the equation with price expectations out of step with the market. The result is an overall weaker market with low levels of liquidity that now favour buyers in most areas.

Seeff noted that the reported slowdown in semigration is also attributable to the slow rate of sales in other provinces combined with high prices in the Western Cape, which has now also put a damper on this market.

Semigration refers to the trend of people relocating, mainly from Gauteng to the Western Cape. 

The mid-market below R2m remains the most active, but very susceptible to financial strain, said Seeff. 

The upper end of the housing market, despite being able to better absorb economic fluctuations, has seen a notable slowdown in Gauteng above R5m, and in the Western Cape above R8m - and in particular above R18m on the Atlantic Seaboard.

The holiday and investment market has also slowed as an inevitable fall-out from the weak confidence levels, he said. 

In his view, the biggest challenge for the economy and market remains the unstable political climate and poor economic decision-making.

In addition to ongoing development across Gauteng, large-scale growth is especially predicted for the northern and north-western suburbs of Johannesburg.

Platforms such as Airbnb, meanwhile, are creating interesting trends in the Sandton property market in particular, he said. 

Property on Monahan Farms (Pam Golding Properties):

A three-bedroom home on Monahan Farm security development in Gauteng. (Pam Golding Properties)

Resilience

Dr Andrew Golding, chief executive of the Pam Golding Property group, said it is expected that South Africa’s residential property market will continue to maintain its resilience, reflecting an ongoing healthy appetite for property investment – particularly in major metros and key hubs. 

He said developers are continuing to bring new products to the marketplace across a range of price bands in response to the demand for residential property in key growth nodes in Cape Town, Johannesburg – including the "New North" of Fourways - Pretoria East, the KwaZulu-Natal north coast and Port Elizabeth.

Golding said factors which will continue to fuel activity in the residential property market include an increasing demand for sectional title properties in convenient locations. He also anticipates a continued demand for secure estate living, both freehold and sectional title, as well as homes catering for the growing retirement market.

Bruce Swain, CEO of Leapfrog Property Group, noted that while at present interest rates remain steady, they could come under pressure to increase as the impact of ratings downgrades takes effect.

Swain said there is currently plenty of stock on the market, particularly in the over R2m price range. This is possibly due to a combination of affordability, political uncertainty and the fact that there is on average a 20% gap between sellers’ asking prices and what buyers are prepared to pay.

In terms of property prices, year-on-year increases will struggle to keep up with inflation, in his view. Properties up to R1.5m are in great demand and developers are already targeting this price bracket.

While property prices are showing some decline in general, there are several hotspots around the country that are bucking the trend. These include the Western Cape, Midrand and the Natal north coast.

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