The outlook for house prices | Fin24
 
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The outlook for house prices

Dec 13 2017 14:16
Glenda Williams

Political noise will remain a key influence on home-buying sentiment and unless positive political change occurs to drive confidence, 2018 looks to be another sub-5% growth year, translating into house price declines in real terms.

“2018 is expected to bring more of the same in terms of being another year of gradual real house price decline,” John Loos, FNB’s household and property sector strategist, said at a recent TPN seminar. 

Key housing market risks remain from the “external” broader economic environment, he said.

“While better economic growth in 2018 is a possibility, a forecast 1% real GDP growth for 2018 is not any significant additional support for the housing market relative to the 0.7% growth projected for 2017 as a whole.”

Nonetheless, Loos said FNB projects a slightly faster average house price growth rate in 2018 to the tune of 4.7%, up from a projected 3.2% average growth for 2017.

“But with CPI inflation for 2018 forecast at 5.2%, that would once again mean a year of average house price decline in real terms, i.e. when house prices are adjusted for CPI inflation.”

Dr Andrew Golding, CEO of Pam Golding Properties, said despite a tumultuous 2017 beset by socio-political uncertainty, the residential property market is strong and has held up well.

Yet many potential homebuyers are currently adopting a wait-and-see attitude.

“It seems fair to assume that if there is clarity on the political future and a positive outlook, there is likely to be considerable pent-up demand resulting in a marked improvement in the local market,” said Golding.

Key trends

As in 2017, essentials will rule in the housing market and “over-exuberance” is unlikely, said Loos. Primary residential demand is king, as are “no-frills smaller-sized homes” with sectional title continuing to outperform full title.

Size will count, said Loos. “Smaller will be better as it has been in recent years and many aging homeowners selling to downscale will also be fueling smaller property demand.” 

And as money goes “defensive,” prime regions and nodes reign supreme, added Loos.

“I think we are moving into a tougher economic period where rentals could do better than home buying and yields could rise in the next few years,” said Loos.

Golding envisages three key trends gathering momentum in 2018:
 
• A growing demand for sectional title properties for both lifestyle and economic reasons within the major growth nodes;

• Estate living (appeal of safe, smaller and less expensive to maintain properties); and 

• Steady transition to more energy and water-efficient homes.

Retirement properties are also a big growth area and Golding sees this trend continuing in 2018, citing KwaZulu-Natal (KZN), the Garden Route and Atlantic Seaboard as hotspots. Other areas of growth are student accommodation and first-time buyers, he said.

Agri-hood: The future ‘golf estate’? 

Another new trend is the growing popularity internationally of agri-hoods – housing estates with residences built around community farms. In SA, New World Wealth notes a move away from traditional golf estates and a rise in demand for retirement and eco-estates.

Golding believes the agri-hood trend will take hold in SA, with one currently potentially on the cards for the Western Cape. “You are basically buying into a farm without having to be a farmer,” Golding told finweek. 

An agri-hood is one where a normal-sized farm creates a mechanism for ownership for multiple individuals that would allow them to build a home, participate in and benefit from the security and lifestyle amenities of the estate, as well as farming activities and products, explained Golding.

“There is a very real community component to an agri-hood.”

“It’s really just a variation of a golf estate,” said Golding, “and clearly estates are working.”

property  |  housing sector
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