Durban - Notwithstanding the fact that South Africa’s economy is technically in a recession, house prices in KZN and Gauteng are rebounding.
Despite an unfortunate factors, including the potential threat of a global trade war, a weakening Rand, rising oil prices and unlikelihood of further local interest rate cuts, the housing market surprisingly has some bright sparks, says Dr Andrew Golding, chief executive for the Pam Golding Property group.
“Economic growth is likely to continue to be sluggish for the balance of 2018 and although forecasts are for slightly stronger growth in 2019, this will take time to play itself out into the property market. Generally speaking, this suggests that the local property market will continue to be tepid but with some areas of outperformance and excellence.”
But for Golding the housing market continues to show resilience as there are still a number of positive foundations – such as the younger demographic eager to buy property and a financial sector with an appetite to extend mortgages.
“With a younger generation eager to enter the property market and an up-and-coming segment of the market which has newfound wealth and a desire to invest in real estate, we hope to see a gradually improving housing market. With household finances under pressure and a young population, we have already seen the lower end of the housing market experience an uptick, particularly as the average price for first-time buyers is estimated by ooba at R939 000.
“Furthermore, there will still be areas that continue to outperform - areas that are fulfilling a particular demand. Examples which come to mind are suburbs which offer an alternative to congestion, a flourishing business hub and easy access to good schools, for example Durban North and uMhlanga in KwaZulu-Natal.”
Golding says overall the housing market is likely to remain subdued against the current economic and political backdrop – but certain nodes will continue to flourish because they offer a particular set of circumstances for which there is ongoing demand.
For buyers and investors, choice of location is now more important than ever, as is the type of accommodation to meet the market demand. Also pricing your home to sell is more important – in a weak market it is critical to price correctly if you want to sell.
“While consumer confidence has been dented as household finances have had to adjust to reduced disposable income, interest rates are relatively low and banks remain competitive and continue to show an appetite for lending, so any setback is likely to prove temporary,” he said.
National house price inflation has softened gradually during the first half of 2018, with prices increasing by an average 4.3% during this period. However, once adjusted for inflation (real prices), house prices at a national level remain unchanged from the same period a year ago. Interestingly, coastal properties (within 500m of the coastline) continue to outperform, with prices rising at almost double the pace of non-coastal properties.
He said that after slowing in recent years, growth in house prices in both Gauteng and KwaZulu-Natal has been rebounding gradually since mid-2017. Pam Golding Properties’ offices in both the Durban and burgeoning North Coast regions of KwaZulu-Natal and the Eastern Cape coastal regions, as well as areas on the Garden Route – in particular George, are upbeat regarding market activity. With appealing climates, these regions are also benefiting from home buyers relocating from upcountry and from a growing retirement market.