19/01/2017
South African property market predictions for 2017:
We asked the heads of some of South Africa’s best estate agencies what we can expect property-wise next year. Here are their responses.
As much as we don't like to admit it, 2016 hasn't been a good year for many of us. We've seen tremendous upheaval across the globe including Brexit, a refugee crisis and a controversial American president elect.
We’ve also lost a number of famous faces - the iconic David Bowie, Prince and our very own, Sfiso Ncwane spring to mind. Things haven't been that rosy in South Africa either with corruption taking centre stage alongside growing political dissatisfaction. There have however been many positives.
The rand has strengthened after its dramatic drop in December last year. Key political figures, including our president, have been found wanting by the courts and forced to uphold the constitution and although the nation’s rugby team has seemingly lost its way, the national cricket side is making us all proud.
Much has been written about the country’s property market and yes, while there has been a general slowdown in the market, prices are, for the best part, holding their own. The banks are still granting bonds and people are still investing in property on a grand scale.
We asked some real estate executives what they predicted property-wise for 2017,
Myles Wakefield, CEO Wakefields Real Estate:
“I’d love to have that crystal ball with 2017 engraved ‘good’ on it, but I don’t. I’m not sure anybody has it. With the astonishing, unexpected, and often almost reverse outcome of some of last year’s events – local and global – any opinions given would say more about me than about the property market.
“What I can say is that we have a number of trends which have been entrenching themselves over the past couple of years, and they will certainly increasingly continue to play out in different ways. With over 40 percent of home loans being granted to first time buyers, it’s clear that that sector of the market is continuing unabated. They’re buying homes, and they’ve buying into what is one of the biggest global trends - increased urbanisation. Small, gated communities where costs and responsibilities are shared, people work together as a community – particularly when it comes to security – and they want their children to grow up in a safe environment, playing in the ‘streets’ with the neighbour’s children. That’s all possible in a gated estate, where people are prepared to sacrifice space for safety and community. They also want to be close to work, play, retail, schools, you name it – they don’t want long, expensive, fuel-guzzling commutes.
Dr Andrew Golding, CEO Pam Golding Property Group:
“While political and economic uncertainty is likely to continue across the globe next year, it is hoped that local economic growth will be modestly stronger, which will 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.
“Much depends on the performance of the rand, but on balance the general expectation is that inflation will fall quite noticeably by the second half of 2017, hopefully with the Reserve Bank looking to cut interest rates during the latter part of the year.
“While the prospect of anticipated stronger US growth would support the South African economic growth rate, a stronger US dollar and increase in US interest rates may impact the rand, with implications for inflation and exerting pressure on our own interest rates.
“Against this backdrop, a recurring theme internationally both currently and historically is that global uncertainty makes property an attractive investment, with potentially good returns and the opportunity for capital preservation.
“We anticipate that 2017 will see the continuation of a number of prevailing trends. These include:
The desire among first-time buyers to acquire a foothold on the property ladder and own their own homes;
An ongoing trend towards investment in mixed-use developments, mainly in metropolitan hubs, as well as the development of secure private estates and sectional title complexes. This incorporates the growing popularity of a convenient lifestyle within easy reach of all amenities and transport, and encompassing the live, work, play, shop concept;
The transition to ‘green’ and sustainable living as pricing pressures resulting from the prolonged drought and rising electricity tariffs will see a continued shift to energy and water efficiency;
The importance of understanding the dynamics of the housing market when making a sound investment decision. These include factors such as the ongoing migration of people, supply of new housing units and lifestyle trends.”
Lew Geffen, Chairman of Lew Geffen Sotheby's International Realty:
“2017 is going to be a tough year for the residential property industry as political uncertainty and a flat economy squeezes consumers further and subdues an already depressed market.
“The Western Cape is underpinning national house price inflation, but much of that is due to the tsunami of semigration that has been the order of the day for several years now. Looking at how flat the Gauteng market has become in 2016, though, if home owners there aren't selling they're unlikely to be buying in the Cape and the knock-on effect will probably slow that market as well in 2017. We do still expect the Western Cape market to be the strongest performer in 2017.
“Looking further afield, greater currency depreciation could see more foreign buyers entering the top end of the market in the year ahead. That depends entirely, though, on whether the international community perceives the country to be politically stable.
“The bottom line is 2017 is going to be a tight year. Sellers need to align their expectations to the prevailing market conditions and buyers need to ensure that their credit records remain spotless if they intend to apply for finance.”
Adrian Goslett, CEO Re/Max of Southern Africa:
“All eyes will be on the rating agencies and whether the country’s credit status is downgraded to junk status. Earlier this year Moody’s Investors Service rating agency affirmed the country’s status at two notches above sub-investment or junk status but gave the country a negative outlook. If the country is downgraded to junk status during the course of next year, access to finance will become more expensive and interest rates will soar.
“A downgrade will have a negative impact on consumers and the property market as a whole. Essentially the country’s rating impacts the cost of credit. A junk status will mean that it will cost more for the government to borrow money, which in turn will have a knock-on effect on the consumer. Financial institutions will need to hold more money in reserve, which will make it more difficult to obtain credit, and the credit that is granted will come at a higher cost. Saving will become tougher but will also become more critical in respect of deposit requirements and the ability to negotiate better rates based on less exposure for the bank.”
Samuel Seeff, Chairman of the Seeff Property Group:
“Based on the current outlook, we expect the market to contract further, especially in view of recent data that showed that GDP growth slumped further.
So, we expect a flat market, although still active as there is always a level of activity with ordinary buyers and sellers going about their business, but we expect overall sales volumes to be slower compared to this year.
Price growth will stall further, save for the hot spots; the Cape for example is likely to remain a little busier than the rest of the country. What we need for a pick up in the market, is a pick up in the economy – as we saw in the 2012-2014 mini-boom period. Just a 1.5% to 3% economic growth can make a huge difference, but we need growth and a stable political environment to boost the property market.
That said, we do not foresee a market collapse or any major downturn, but of course, uncertainty has become the name of the game so to speak as anything can happen that will upset the market as we saw with Nenegate a year ago, Brexit, the Trump election, the shift in power following the local elections and so on.”
