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SA property buyers want more bang for their buck

SA property buyers want more bang for their buck

‘Plenty of sparkle but no pop’ is how the outlook for SA’s residential property market for the rest of 2014 can be described.

Slow to steady growth

While ‘mildly positive’ may sum up the year’s property prospects, most commentators observe that the current slow-but-steady growth trend could easily be reversed by one or more outside factors, and predict an average home price growth of only 8 or 9% as a result.

RE/Max of Southern Africa CEO Adrian Goslett notes, for example, that: ‘As usual, the success or otherwise of the market this year will be largely dependent on and driven by consumer sentiment, which will be fuelled positively or negatively by factors such as the political climate in the run-up to the General Election, labour unrest and various other possible scenarios.’

Some of the other factors that will no doubt be in play in determining confidence among SA property buyers are economic growth and employment prospects, the rising cost of living, service delivery protests, ‘ordinary’ crime unrelated to political events, and stubbornly high household debt levels –


Property sales have increased however

However, all of this needs to be viewed in context. While the BER index has shown a steady decline from a level of 14,5 in 2010 to 7,3 in 2011, to –0,5 in 2012 and–4,7 in the first three quarters of 2013, residential property sales volumes and prices have gone in the other direction during this whole period determinedly following an upward path, although admittedly not always smoothly.

There was also some disappointment at the end of last year when the Reserve Bank decided to leave the repo rate unchanged at 5% in order to limit the risk of the inflation rate breaking the 6% barrier. For example, Shaun Rademeyer, CEO of mortgage originator BetterBond, warned that this pursuit of inflation stability over the next year could well come at a cost to prospective homebuyers and thus the residential property market.

Rising pressure on consumers

He noted that even though rates had been at historic lows for 18 months, consumers had been unable to achieve a significant decline in the household debt to disposable income ratio of around 75%, or any improvement in the household savings ratio. ‘And now with rates unchanged, consumers still trying to reduce their debts while coping with ever higher transport, food, medical, education and electricity costs are not likely to have much disposable income left over to either save for a deposit or afford a bond repayment,’ Rademeyer says. ‘Many first-time buyers, in particular, may have to defer their home-buying plans, which will take a lot of the impetus out of the market – and out of the economy as a whole because of the ripple effect that home buying and building has on many other sectors.’

The most recent report from the National Credit Regulator also reveals that 9,76 million of SA’s 20,29 million credit-active consumers (48,1%) have impaired credit records, which would also limit their ability to raise new credit such as a home loan.

Demand still high

To clarify, however, this does not suggest any fall-off in demand – only that quite a number of those who would like to buy will not be able to access the finance they need to do so, and that home ownership will thus grow more slowly than it might have done if unimpeded by these affordability and credit issues. Indeed, most commentators agree, there is no lack of demand, but a focus on value for money. Show day attendances are up by about 40% as more and more potential buyers realise, as Seeff chairman Samuel Seeff puts it, that this is still the best time to buy in over three decades. ‘Since there has been no major capital appreciation over the last few years and the interest rate is still at a historic low, the value on offer is outstanding.’

Recently, there has also been increased activity in the buy-to-let market, thanks to a strong rental sector. Investment buying now stands at 7% of total residential property purchases, according to the FNB Property Barometer, but is set to increase as the supply of rental homes is increasingly constrained and rentals are rising.

Increase in home-loan applications

Further evidence of strong and growing demand is to be found in the increasing number of home- loan applications being processed each month – and the higher numbers of home loans being granted as a result.

And with more sales going through due to the sheer weight of buyer numbers, stock shortages are becoming an increasingly widespread challenge for estate agents, especially in the most popular metropolitan areas.

Increased demand pushes prices

The question now, says Dr Andrew Golding, CE of Pam Golding Properties, is when – or if – these shortages are likely to start translating, as might be expected when supply is under pressure, into significantly higher property prices. So far, they do appear to be driving faster sales, with the average listing time having dropped from 120 days to 103 days in the last quarter of 2013, but the answer to the question still appears to be: ‘Not any time soon.’

Security top-of-mind

There is likely to be an increased trend towards security and gated type communities, with more and more South Africans pointing to security as their priority when choosing where to live, says Adrian Goslett, CEO of RE/Max of Southern Africa.

‘We are also likely to see an increased trend towards smaller or more manageable homes in 2014, with consumers opting for properties that are closer to their needs – such as their places of employment, their children’s schools and other amenities like shopping centres and medical facilities, as appropriate to their age, financial profile and current life stage.’

Accessibility also a consideration

Dr Andrew Golding, CE of Pam Golding Properties, says another growing trend is the move towards owning a home that offers a desirable lifestyle and is within easy reach of public transport such as the Gautrain and/or a rapid transit bus route. ‘This is why vibrant revitalised or new live-work- and-play nodes – such as Melrose Arch and the Maboneng Precinct in Johannesburg, Gateway in uMhlanga, and Cape Town’s CBD and Woodstock regeneration nodes – are becoming so popular.’


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