The generally market-friendly election outcome will in all likelihood create a degree of certainty and stability and go some way towards addressing the issues currently affecting confidence in the South African economy - and as a consequence have a positive effect on the South African residential property market, said Dr Andrew Golding, chief executive of the Pam Golding Property group.
Golding said, "While It is anticipated that, in the wake of the favourable election outcome, the residential property market will rebound, in reality, any significant recovery is only likely to materialise in the later stages of the year after the seasonally quiet winter months".
Furthermore, while It is fair to say that the post-election environment is likely to be better for the property market generally, a number of specific questions arise, including how the land reform question will play out in terms of policy amendments or variations and also whether or not other market-friendly reforms are introduced.
"It is also worth noting that casting a general market view over the entire market is often not necessarily advisable or accurate – as different provinces, regions, cities and sectors perform differently. For example, there is a shortage of accommodation for students and retirement developments in different parts of the country. As a result, activity is likely to be brisk in these market sectors despite the subdued conditions in the broader national housing market," said Golding.
Golding said that looking ahead, with household incomes likely to remain under pressure in the short term - with continued petrol price hikes (including the introduction of a carbon tax in June) - and with a large percentage of renters and buyers coming to the market for the first time, the lower end of the market is likely to continue to hold up well relative to other sectors of the market. Smaller sectional title properties will also perform better as a result since this sector is often favoured by students, first-time buyers and down-scalers.
He added, "These sectors of the market would also be those that would benefit most from a rebound or turnaround in the economy. First-time buyers are typically most sensitive to prevailing economic conditions and are a strong potential source of demand for the market. In areas where market price corrections have improved the perceived affordability of a property, it seems time on the market is declining and buyers are showing a willingness to purchase".
This is a micro market because of its unique geography with world-class scenery including mountains and a pristine coastline, plus its location ensures limited availability. Cape Town house prices continued to grow strongly in recent years, even as the rest of the South African housing market cooled in response to the tepid economic growth rate. This was in part due to the semigration trend which saw people move to the Cape. As this trend naturally slowed, this prompted a correction in Cape Town house prices, in turn resulting in buyers seeing value return to this market across all sectors.
Basil Moraitis, Pam Golding Properties area manager on the Western Cape Atlantic Seaboard said, "In Cape Town, the City Bowl and Atlantic Seaboard were the first to see a correction in house prices – the first in the last 20 years - undoubtedly because these had risen the most in these areas. Now that prices in these areas have adjusted, these suburbs may well be the first to show signs of a turnaround as buyers perceive renewed value in this sought-after market".
"This has also presented a significant opportunity for the savvy buyer who wishes to acquire a strategic asset on the Atlantic Seaboard. An indication of renewed activity in these areas is that between June 2018 and April 2019, we have concluded numerous sales in the top-end luxury market in excess of R20 million," he added.
Dr Golding said that at the same time, it makes sense that Gauteng and KwaZulu-Natal would recover before the Western Cape, as these markets have been well-balanced for several years now, so already reflect current prevailing economic conditions. On a further positive note, Gauteng appears to be experiencing an influx of younger, potential buyers and rental tenants attracted by this major economic hub.
Dexter Leite, Pam Golding Properties rentals manager in the Cape Town metro, says while the residential rental market has been slower this year, it also remains relatively stable, with micro-areas and pockets of activity in high-demand areas being the exception. “Although considerable rental stock has come to market, we have also let much of this stock. Properties that were well-priced and in demand have been let.
“The Atlantic Seaboard and City Bowl in particular has also had to deal with an influx of investors entering the Airbnb market during recent years, many of which then find their way onto the long-term rental market, especially after the seasonal summer demand has abated. In addition, some of these ‘short-term’ investment properties have not had the desired short-term uptake and as a consequence have tended to migrate onto the long-term market, further adding to the inventory.”
Leite says coupled with this, during the past three or so years a large number of new-build residential development units have been brought to market.
"These units tend to let quickly, in preference to the older stock in the various target or high-demand areas, with their traction based on being new and modern, and part of a ‘lifestyle’ development with good security, and with the older units adding to the pool of available stock. As a result, these new developments tend to bring large swathes of stock to market simultaneously, causing an oversupply for periods of time," said Leite.
In the current market, the best perceived value property invariably lets first, so it’s best to be guided by established, area specialist rental agents on pricing.
"Rental options also provide flexibility as you are not compelled to sell your home before relocating. Going forward, growth in the economy and improved sentiment will no doubt augur positively in the buy-to-let investor context," concluded Leite.
For home buyers, Golding said that buying opportunities abound in the current market, with some capitalising on the medium and long-term benefits offered through buying in a new development.
"Buyers are advised to pay attention to value in relation to what’s on the market. Buy the home that offers the best in relation to location and requires the least building interventions, also proximity to schools and shopping centres. Sellers are advised to ensure their home stands out when competing with the homes for sale in close proximity," concluded.
Dr Andrew Golding is the chief executive of the Pam Golding Property group