2014 is fast coming to a close and with it, questions arise as to how the residential property market might perform in 2015.
According to those in the know, demand for residential property in particular is on the rise, most notably in the more affluent suburbs. This is telling as high-end buyers are usually quite knowledgeable about property investment and tend only to act when conditions favour them.
Interestingly, demand for buildings in Johannesburg’s CBD that can be converted into residential blocks is also growing, which potentially points to a shift towards high-density living.
An informed viewpoint
Simon Bray, COO at Private Property, believes that the market will perform in much the same way as it has in recent times going forward into 2015. “One thing appears to be true of the post-boom property market in South Africa and that is consistency. Nothing particularly volatile has happened in the market since the credit regulations of 2008. We see slow but steady recovery in transaction volumes and this trend should continue into the first half of next year.”
In terms of growth “hot spots”, Simon says that gated communities will continue to lead the pack. “Gated communities, apartment blocks and estates are being looked at as more attractive than traditional upmarket suburbs. Their perceived benefits like security, shared costs and lifestyle facilities are driving buyers away from traditional suburbs to the detriment of those established markets.”
He points out that one of the most influential factors that will drive the property sector in 2015 will be a healthy supply of credit. “If banks continue to grow their lending book as we have seen them do this year, then 2015 should be a good year for the property market. However, as the major banks are multinational businesses, they are exposed to risk from global weakness which, in conjunction with their recent credit rating downgrade may put pressure on their appetite to lend.”
The interest rate
Finally, commenting on the interest rating cycle, Simon says he doesn’t believe that the interest rate will increase significantly in the next 12 months, but that South Africa has definitely entered an upward cycle.
“The recent rise of .25 basis points indicates the Reserve Bank’s intention to conservatively increase rates. This is unlikely to dent consumer confidence in property and demand should continue to improve. How a rising interest rate will affect the credit environment is another story entirely. Lending institutions may be cautious of rate increases in the midst of other inflationary pressures like rising food, fuel and utility costs as this all impedes the ability of their clients to repay their loans.”
Only time will tell.