Property market predictions for 2019, and why the experts are encouraging you to buy property now.
The residential property market in 2018 took a downturn, with land reform policy uncertainties rife in South Africa. This, along with a slower economy, bred a lack of confidence.
Stability generally leads to consumer confidence, which is the key to an upturn in the property market. With the elections imminent, many experts think that the property market may improve later in the year once there are signs of the economy recovering.
We are currently in a buyer’s market and this is the ideal time for first-time buyers to seize the opportunity and enter the property market. Those who buy now will get maximum value for money, as property prices are relatively constrained and bond repayments will therefore be lower, due to a lower demand. However, this is expected to increase after the elections, so buyers are encouraged to take the plunge sooner rather than later.
Here’s what the experts have to say:
Berry Everitt, CEO of Chas Everitt International Property Group
“We have a Finance Minister now who is firmly committed to containing government spending and bringing down the national deficit, so although it is probably going to be a long road back to prosperity for SA, there is a growing confidence that we are definitely going in the right direction, even among the ratings agencies like Moody’s and S&P.” says Everitt.
The shaky world situation is also expected to give a further boost to local home demand and sales, he says “but even as things are, SA banks are keen to lend to home buyers, household debt is at a 10-year low and recent statistics from Lightstone and BetterBond show that SA is already quietly gaining about 77 000 new home owners a year.
“Barring disaster, we are anticipating a surge in prices following the Election, which will mean that buyers have to earn more to afford the homes they want, take out bigger bonds and pay higher monthly instalments. In addition, they will have missed out on the substantial value growth that they would have gained by buying now, while prices are still relatively suppressed. Those who do buy now, on the other hand, will gain that post-Election jump in the value of their property, and enjoy the benefits of a smaller monthly bond repayment. In short, they stand to derive the maximum possible advantage out of the strong market recovery that we foresee taking place over the next four years.”
Herschel Jawitz, CEO of Jawitz Properties
Property prices are expected to remain subdued and even with an improvement in demand, homes on the market are expected to take an average of three-and-a-half months to sell with this extending to six months and more at the top end of the market.
Consumer confidence holds the key to any possible turnaround in the residential market in 2019. While consumer confidence remains in positive territory, it has not yet translated into an increase in the demand for property by buyers. This buyer caution will be compounded by pressures on disposable income and the perceived uncertainty as the country heads towards the 2019 election. The result is an oversupply of residential property across almost all price sectors in the re-sale and new build/off-plan market. The key buying criteria remains value, which is the combination of price, size, position and condition of the property.
In the Johannesburg area, the high cost of living and the need for security will see the trend of downsizing and empty nesting continue. While in Cape Town, high prices will mean more first-time home buyers will be looking in up-and-coming areas such as Salt River, Woodstock and Observatory; further up the seaboard into Blouberg; as well as the Durbanville and Kuils River nodes.
Paul Stevens, CEO of Just Property
“We are in a buyer’s market and this will continue through most of 2019,” Stevens predicts. “Those who qualify for finance or who are able to buy for cash will be in a good position to take advantage of the current conditions. Most of the property sales activity in the past year has been in the R300 000 to R1 500 000 range. During the course of the coming year, I expect this to continue. Government is focused on developing our economy, at least in part through the development of entrepreneurs. If successful, we should see an increasing number of people able to enter the lower end of the property market.”
“From a rental perspective, I see our current conditions with high vacancies and low escalations across most of the country, fuelled by lower than normal demand, continue into 2019. Historically, we have seen rental demands increase during tough economic times. But this is not happening now. Our data partners, TPN, report that average tenancy periods have increased to 18 months and the average age of tenants is now 32, (up from 24 in 2008). Their data shows that fewer people are entering the rental market and the majority of those that are, rent for less than R7000 per month. The short-to-medium term opportunities for property investors and landlords therefore lies in properties that allow for multi-generational living and in properties that can be rented for R3500 – R7000 per month.”
Gerhard Kotzé, MD of the RealNet estate agency group
Many local market indicators are already positive and the most astute buyers and investors are purchasing now, while prices are still relatively constrained and sellers are still willing to negotiate, because they believe that the tide has already started to turn.
“Billions of rands are also already in the pipeline to boost local business development and employment creation after this year’s Presidential summits, and we expect that these pledges will start to bear fruit very early in 2019.”
Samuel Seeff, chairman of the Seeff Property Group
Seeff says that consumers and home owners should also be prepared for further potential interest rate hikes next year, but highlights that the rate is still at some of the best levels in decades.
The latest FNB and ABSA property data shows that the property market indicators continue to deteriorate with properties staying on the market for longer and an increasing number of sellers having to cut their asking price. Conditions remains weighted in favour of buyers and will remain so into the early part of 2019. Sellers will therefore have to continue keeping their price expectations in check.
All in all, we will need to be patient for a little while longer as the market is likely to remain fairly flat for the first few months of the year. However, there is every reason to feel positive that the economy should start lifting towards mid-2019.