Pretoria - Economic and political uncertainty appears likely to continue hitting South Africa’s residential property market next year.
Andrew Golding, the chief executive of the Pam Golding Property group, said yesterday while political and economic uncertainty was likely to continue across the globe next year, it was hoped that local economic growth would be modestly stronger, which would be more supportive for the South African housing market.
“Economists and commentators in general are more positive about growth next year, while business confidence has improved, which in turn enhances overall sentiment, which is a key driver of the residential property market,” he said.
Golding said much depended on the performance of the rand, but on balance the general expectation was that inflation would fall quite noticeably by the second half of next year, with the Reserve Bank hopefully looking to cut interest rates in the latter part of 2017.
“While the prospect of anticipated stronger US growth would support the South African economic growth rate, a stronger dollar and increase in US interest rates may impact the rand, with implications for inflation and exerting pressure on our own interest rates,” he said.
Golding said a recurring theme was that global uncertainty made property an attractive investment, with potentially good returns and the opportunity for capital preservation.
Siphamandla Mkhwanazi, an economist at Standard Bank, said last month was set to become the worst-performing year for residential property since 2012, and remained bearish on property prices into next year.
Mkhwanazi said year-to-date house prices were only up 5 percent, compared with 14 percent last year.
He said Standard Bank’s house price index had underperformed by 3 percent versus 2012, 19percent versus 2013 and 9 percent versus both 2014 and 2015.
Mkhwanazi believed purchasing activity would continue to point to subdued demand because of rising political uncertainty, slowing growth of disposable income, a tightening labour market and tight financial conditions. “We expect consumers to remain under pressure into 2017, with household expenditure only recovering in the third quarter, once the SA Reserve Bank starts cutting rates,” he said.
Jacques du Toit, a property analyst at Absa Home Loans, said in the bank’s latest quarterly housing review that based on macroeconomic and household sector-related trends and prospects, nominal house price growth was forecast to remain in a relatively narrow range of between 3.5 percent and 4.5percent this and next year.
Read also: Real home price growth is declining
Du Toit said real price deflation of between 1.5 percent and 2.5 percent was projected over this period, after taking the effect of inflation into account.
John Loos, a household and property sector analyst at FNB, said that after a lengthy period of weakening “signals” in the housing market dating back into last year, the slowdown in year-on-year house price growth had “sped up” considerably.
Loos said FNB’s forecast economic growth rate of 1 percent was unlikely to make a meaningful difference to residential demand, and therefore expected few residential supply constraints next year, resulting in a year of low house-price inflation averaging near to 3percent.
“This would translate into an average house price decline in real terms,” he said.
But Golding anticipates a continuation of a number of prevailing trends in the property market. These included the desire among first-time buyers to acquire a foothold on the property ladder, and an ongoing trend towards investment in mixed-use developments and the development of secure private estates and sectional title complexes.