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The road ahead for SA property in 2016

09 Dec 2015

During 2015 the South African residential property market continued to see improvement with consumers still placing a high value on homeownership. This is despite the fact that consumers experienced increases in electricity tariffs and interest rate hikes.

While the residential property market has shown improvement, Goslett says consumers who are looking to purchase property in 2016 will need to start preparing themselves now by focusing on building savings and reducing their debt-to-income ratios as much as possible.

This is according to Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, who says while there were many prospective buyers who struggled to meet deposit requirements during 2015, those with access to finance were ready to embark on their journey towards homeownership and get into market as soon as possible.

Goslett predicts that access to finance will continue to be tough for consumers in the new year. 

“The effects of the recent interest rate hike will be felt by consumers during the festive season and will impact the property market moving into 2016. The Reserve Bank has been warning consumers that we are currently in a rising interest rate cycle, and will be for some time,” he says.

“It is highly likely that we will see further rate hikes during 2016, which will continue to put financial pressure on consumers. Rate hikes will influence affordability ratios and make it more difficult for prospective buyers to gain access to finance.”

While the residential property market has shown improvement, Goslett says consumers who are looking to purchase property in 2016 will need to start preparing themselves now by focusing on building savings and reducing their debt-to-income ratios as much as possible.

He says while most areas are performing well in terms of house price growth and sales volumes, markets in and around metropolitan areas are slightly more accelerated than their non-metropolitan counterparts.

“Another trend that we are seeing is that homes are generally spending far less time on the market than they did post-recession. Properties in good locations are selling within two weeks on average, whereas these same properties would have sat on the market for months before selling during 2010,” says Goslett.

“This trend is expected to carry over into 2016 with stock shortages still a reality in some areas.”

“Over the long term, property has proven to be a solidly performing asset and should be a core component of any investment portfolio. The crux is for buyers and sellers to understand the market conditions in which they are trading and tailor their buying and selling decisions and behaviour accordingly,” says Goslett.

He says other factors that will have an influence on the residential market include potential hikes in the fuel levy and personal tax.

According to Goslett, those who are unable to meet the necessary affordability ratios will be forced to stay within the rental market a while longer.

“The rental market has seen good growth during the past year, with demand also outstripping supply, particularly in areas around CBDs. Access to finance will have a major impact on the demand for rental properties, especially those that are well placed close to business hubs and a wide range of amenities,” says Goslett.

“Buy-to-let investors should aim to grow their property portfolio to benefit as much as possible from the growing rental demand.”

In 2016 he says we will continue to see excellent growth within the affordable housing sector, as well as continued demand for homes within gated communities that offer security.

“Security in South Africa is and will continue to be a major factor that influences buying decisions, one of the many reasons why gated communities and estates will remain a popular choice among home buyers,” says Goslett.

“Homes with lower maintenance requirements will also continue to be popular, mainly due to increased utility and municipal costs which are placing additional pressure on consumers’ pockets.”

He says while there are any number of factors that could influence the property market and its performance in the year ahead, the residential market continues to hold its own, despite challenging economic conditions.

“Over the long term, property has proven to be a solidly performing asset and should be a core component of any investment portfolio. The crux is for buyers and sellers to understand the market conditions in which they are trading and tailor their buying and selling decisions and behaviour accordingly,” says Goslett.

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