Residential property slowdown offers buying opportunities
The SA residential property market is experiencing its worst run since the 2008-09 economic crisis.
According to John Loos, household and property sector strategist at First National Bank, average house price growth has been declining for the past four years because of persistent weakness in the economy and little interest from potential buyers. He said there were no clear signs that there would be an improvement in 2018.
Loos said his research showed that year to date, average national house price growth was 3.5% year on year. This meant the value of residential property was falling if inflation of 5% was taken into account.
“The housing market needs to reflect the economy. GDP growth of 1% to 1.5% isn’t enough to get real growth in house prices, ” he said.
Average house price growth has suffered a steady decline since 2014, when it hit 7.9%. It fell to 6.1% in 2015, 5.8% in 2016 and 4.2% in 2017, Loos said.
Another indicator of weakness was that the average time that a house was on the market had lengthened from 12 weeks in 2015 to 16 weeks in 2018.
While there has been little interest from buyers, residential property offers opportunities for first-time homeowners, particularly in Gauteng, according to Pam Golding Properties.
Bradd Bendall, GM real estate operations for Pam Golding Properties, said the strongest growth came from Johannesburg’s northern suburbs, as well as Midrand and Pretoria, where young professionals were keen to live.
He said that in some cases there were even stock shortages in these areas. However, overall consumers were under pressure in a weak economy, which had led to fewer house sales nationally.
Pam Golding Properties CEO Andrew Golding said that even areas that had traditionally outperformed the market had tapered off dramatically.
He said the Western Cape property market, for instance, was slowing even though it still outperformed the rest of the country. “This is not surprising given the fact that the Western Cape market ran well ahead of the prevailing subdued economic realities, fuelled in part by a strong semigration trend, so a natural correction was anticipated,” said Golding.
Ian Slot, MD for Seeff Atlantic Seaboard and City Bowl, however, said the Western Cape had shown an ability to rebound strongly in the past.