Experts say delaying a property purchase will result in paying more when the industry picks up after the election
The real estate industry is welcoming the forecast that property market activity is likely to be stimulated after May’s general elections, and they see the industry ending the year far stronger that it did in 2018.
Even though the Lightstone Property Forecast for 2019 predicts the first quarter of this year will remain much the same, there is light at the end of the tunnel. Paul-Roux de Kock, analytics director at Lightstone, says the first quarter of 2019 will continue on a “similar slow downward trend, within the constrained economic environment”.
However, after the elections, the country “will most likely” experience a positive economic turnaround, with certainty on economic policy and property ownership believed to stimulate positive property market activity.
Should the property market follow a “mid-road scenario”, it will end the year in a similar position to 2018, which De Kock says looks set to be a “low-road” scenario of 2.9% growth, as opposed to the initially forecast 3.8%.
If the economy fundamentally strengthens and significantly boosts buyer confidence in the market, it could not only end in a “high-road” scenario, but also has the potential to “break through this forecast percentage.”
Should the high-road scenario be the case, and CPI falls to the lower end of the 4% to 5.5% bracket predicted by Lightstone, Adrian Goslett, regional director and chief executive of Re/Max of Southern Africa, says the country would have exited the cycle of house price decline.
He also believes the market is likely to see an improvement after the elections. “Many choose not to purchase large assets pre-election as their decision to invest hinges around the outcome of the election.”
If the election goes smoothly, Goslett says it will bring back confidence and certainty to the market and the economy as a whole and “hopefully be the catalyst that creates positive strides in the right direction”.
This is in line with Lightstone’s prediction that there remains potential to end the year breaking through the forecast percentage for the high road scenario. “It also strengthens the argument that now is the ideal time to purchase property,” Goslett says.
Although market sentiment is expected to increase, it will take time before the market picks up and moves significantly in either direction, says Mike Greeff, chief executive of Greeff Christie’s International Real Estate. “The impact of flat pricing is that buyers have more leeway to negotiate but any delay in purchasing will only result in paying more.”
What to expect in the year ahead
Looking at the forecast for particular value bands, Lightstone has predicted that:
- The luxury property market will continue its “negative nominal growth” during the first quarter of the year before correcting during the second half of 2019.
- The high value segment should see 2018 house price growth of 2.6% increase to 2.9% by the end of this year
- The mid-value segment is set to stabilise and end 2019 with 4.7% growth, with strong real value growth should the economy follow the high-road scenario.
“In the run-up to the national elections, uncertainty will most likely increase in the property market as the political and economic environment remains tumultuous,” says Paul-Roux de Kock, analytics director at Lightstone.
He says debates on land reform in the residential property sector are expected to continue to influence buyer confidence. However, De Kock highlights that early indications are that the property industry could still experience a “robust recovery” in 2019.