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Positive indicators for SA's property market in 2016

14 Dec 2015

Following a year which saw South Africa’s housing market rise to the challenge amid tough economic conditions, a number of positives stand out.

Dr Golding says while nominal house prices continue to rise, the resurgence in consumer inflation is, however, gradually eroding the recent recovery in real house prices.

This is according to Dr Andrew Golding, chief executive of the Pam Golding Property group, who says despite a slight slowing of sales volumes across the market in total, growth in house prices continues to outstrip inflation, reflecting the continued strong demand for homes to rent and to buy - which exceeds supply, especially in the major metropolitan areas of the country.

According to the Pam Golding Residential Property Index, although national house price inflation eased to 5.3% in October 2015, which is less than 1% below the September or October 2014 peak, the lower price band below R1 million is still outperforming the national average at a notable 8.9% in October, or 7.45% for the year to date.

Dr Golding says while nominal house prices continue to rise, the resurgence in consumer inflation is, however, gradually eroding the recent recovery in real 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 R3 million, with 53% under R1.5 million. The average selling price was R918 000.

Dr Golding says first-time buyers are adding impetus to the market, with ooba recently reporting that 54% of applications for home loans comprise first-time buyers, up from 38.5% of the market in mid-2007.

Positive news is the healthy competition among lenders, with borrowers currently averaging a rate of prime plus 0.28%, down from 0.46% a year ago.

“Further to this, the top end of the South African property market above R10 million continues to be active, demonstrating continued resilience and buoyancy. For example, on the Cape Atlantic Seaboard we are seeing an uptick in luxury sales, particularly priced from R20 million to R30 million, and mainly to Gauteng buyers,” he says.

Dr Golding says in three weeks alone, three sales to a total value of R67.8 million have been concluded in Clifton, and over a similar time frame eight sales in Camps Bay to a total value of R95 million. Price growth in the luxury market on the high-demand Atlantic Seaboard stands at 25% over the past 12 months.

“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,” says Dr Golding.

“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.”

He says 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.”

 Dr Golding says international trends 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. For example, an office park, retail opportunities and easy access to public transport while enjoying of a suburban lifestyle.

With many local authorities unable to adequately deliver services and again in an attempt to avoid growing congestion, homeowners are increasingly opting for mixed-use developments which offer medical, education, retail and residential in a single, secure environment, he says.

“Along with this, and following a global trend, factors of affordability, particularly from a younger generation, are expected to prompt local investors to begin focusing on developing properties intended for rental rather than sale,” says Dr Golding.

“The imperative towards green, environmentally sustainable homes will gather momentum with increasingly expensive electricity and the impact of water shortages reinforcing this trend.”
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