PROPERTY OUTLOOK FOR 2015
Category From the CEO
Investment Back on the Cards after Property Market Resurgence
Even though the South African economy may still be recovering from backlash of the recession post 2009, various experts and critics remain aloof and pessimistic about economic growth. Judging from interest rate hikes and unemployment figures it is easy to see why some would persist to call it economic stagnation rather than recovery. Remarkably, though, the residential property market continues to exceed expectations in terms of growth, with some independent experts predicting “double digit” increases in the sector for this year.
Greg Harris, CEO of Chas Everitt Property Rentals is confident that this is the best time to invest, given the economic climate and particularly the property sector performance over the last few years. “Investment is the way to go this year. Predicted rises in the property market growth will also encourage development as confidence rises, giving more people the opportunity to buy and rent. Benefits like the credit amnesty and a looser grip on credit by lenders are strong incentives for pure investors, buy-to-live individuals - all the way to tenants and even holidaymakers, who will ultimately benefit as investors opt for B&Bs, accommodation and so on”, said Greg.
John Loos, a property strategist from FNB echoes a similar, positive view: “The market is far from booming, but has shown nice solid performance over the past three years since 2012.” This can be attributed to a number of factors including a marked improvement between supply and demand. “Rising demand has gradually mopped up excess supply, and a noticeably increasing percentage of estate agents participating in the FNB Estate Agent Survey have been pointing to shortages in residential units for sale”, said Loos.
With this resurgence, investments are looking increasingly like the way to go – with thousands of locals and foreign nationals looking to cash in on the upswing of the economic pendulum, so to say. This is especially true in trendy, upmarket areas that see young families and graduates occupying many of the properties.
Where do we stand at the moment?
It’s strange to think that the local property market has been experiencing noteworthy growth and optimistic forecasts for the year ahead, despite trying economic times that many industries are still facing. One of the trends that have been noted is how fewer first time buyers are purchasing in the current climate. As interest rates remain quite high, would-be first time buyers are holding off on purchasing instead opting to rent as fist prize, while some stay in digs or simply remain with their parents until they can afford to rent or acquire.
This also doesn’t mean that first time buyers should totally avoid purchasing. Steven Barker, the head of Standard Bank’s home loan department was quoted in the Cape Times as saying “Property has become more accessible to this market because of the expected increase in disposable income.” This essentially comes down to how economic growth and how well the Rand perform over the year. FNB’s property barometer predicts that should all of the economic factors fall into place, we could expect disposable income growth in the region of 1.9% in 2015.
It’s also worth noting that South Africa remains a cheap investment opportunity for international buyers. This is likely to be one of the sectors of the market which will experience significant growth.
Where to invest?
Investing in property isn’t a decision that anyone should be taking lightly – whether you’re a seasoned investor or a first timer. Property experts predict a lot more sustainable growth in the metros – especially from first time buyers – as opposed to the more outlying suburbs. Data released from FNB show that first time buyers make up 35% of the purchases in metros like Johannesburg compared to the national average of just 28%.
There are a number of different reasons for this. More and more graduates and younger people are attracted to metro areas because of the greater economic opportunities that they offer. Investing in trendy, upmarket areas that are within close proximity to the CBD will offer you the best returns in future – especially as the demand for property in these areas increases. Sectional title properties in these areas remain the most attractive as they require very little maintenance and offer better all-round security - resulting in landlords being able to demand higher rentals too.
In response to the above, Barry Davies, Franchising Director of Chas Everitt International Property Group offered some insight on the potential in outlying areas as well as the metros. “That isn’t to say that you’re not going to find any value outside of major metro areas. A prime example of this would be the town of Ballito on KwaZulu-Natal’s north coast. The area, although relatively small, has experienced something of an explosion in terms of property development and permanent residents. It is still growing further and has essentially become one of the most attractive places to invest in property in South Africa”, said Barry.
There is still plenty of growth going on in South Africa’s property market. There are residential areas across the country where demand is simply greater than the supply at the moment. This is driving both purchase and rental prices up in these regions. There seems to be a general consensus around the board that although the property market is still showing signs of resilience and growth, it is doing so at a relatively moderate rate. For instance, in spite of growth the average price increases are still affordable enough for those on the market to buy property and invariably those seeking to rent as well. The buy-to-let sector has also shown steady growth over the last year or so – an area of the market that had underperformed quite substantially until recently.
Looking to invest in property or to rent? Get in touch with the experienced team at Chas Everitt Property Rentals today and find out more about investment opportunities or available rental listings in your area.
Author: Paula harding