The residential property market will remain the same for the last quarter of 2014 and the first half of 2015 for the larger metros of Pretoria, Johannesburg, Cape Town, Durban and smaller cities, Port Elizabeth, East London and Bloemfontein.
As long as buying decisions are long-term in nature (at least three to five years), now is still a good time to buy, and an even better time to sell.This is according to Herschel Jawitz, CEO of Jawitz Properties, who says there is a shortage of properties for sale in these markets, and good demand from buyers across almost all price levels. The first-time buyer sectional title market (up to R2 million) and the family home market (up to R4 million), are experiencing the most activity. The luxury market is also seeing significantly better demand, as is vacant land, as buyers in that market choose to build themselves due to the stock shortage.
This imbalance between supply and demand has resulted in better than expected price growth of between 8 and 11 percent in nominal terms in 2014. This is likely to continue at a slightly slower rate for the remainder of 2014 and into 2015, says Jawitz.
The situation is noticeably different in the coastal leisure markets, where supply still exceeds demand, and as a result, price growth will continue to be marginal.
The buy-to-let market remains healthy for investors, driven by similar factors to the residential sales sector. With good rental demand and a shortage of rental stock at the lower price levels, above inflation rental escalations are being achieved, and yields of up to 10 percent are possible.
He says three key factors will continue to determine the direction of the market into 2015, namely bank lending, interest rates and consumer confidence.
Despite the economy, banks have continued to ease their lending criteria, making the market more accessible to buyers. In addition, he says as a result of the challenges in unsecured lending, which is likely to worsen in a rising interest rate environment, there may be more bank funds flowing into secured lending such as home loans. This is good news for buyers and sellers.
Rising interest rates impact affordability, especially for first-time buyers at the entry-level sector of the market, who are the most interest-rate sensitive. While it is likely that interest rates will continue to increase into 2015 to bring inflation within the Reserve Bank's six percent target, they are, by South African standards, still relatively low. Even with further increases, current demand is unlikely to slow down significantly, says Jawitz.
He says residential property is a long-term buying decision, and if consumers are feeling less confident about the economy or their personal circumstances, long-term buying decisions may be deferred. According to the latest FNB/BER Consumer Confidence Index, while current consumer confidence levels are low, they are feeling more confident about where they will be in 12 months’ time, and that is positive for the residential property market.
Jawitz says despite rising interest rates, there is no indication that the current shortage of properties for sale, relative to demand, will ease, which is a real challenge for buyers. He says as a result, property prices will continue to increase in 2015, even if at a slower rate than in 2014.
Increasing prices and rising interest rates mean that buying a property will only become more expensive over the next year, and for buyers, this means higher deposits and repayments, he says. As long as buying decisions are long-term in nature (at least three to five years), now is still a good time to buy, and an even better time to sell, he says.
Print
