Is property on the high road?
While there’s uncertainty in the air, signs show sector is poised for a robust recovery
THERE are signs that the property market could experience a robust recovery this year despite political and economic uncertainty, particularly in the run-up to the national elections.
This is according to Paul-Roux de Kock, analytics director at Lightstone, following yesterday’s release of the company’s 2019 Property Forecast.
Lightstone, for the first time, has released a forecast that excludes a large portion of the November and December sales still in the registration process. De Kock said the reason was to dissipate some of the ambiguity causing uncertainty.
He said a preliminary review of last year’s forecast showed that the market was ending the year closer to price growth of 2.9 percent, as opposed to the forecast 3.8 percent.
De Kock said the outcome was mainly because of lower-performing GDP rate, a trend he expected would continue this year, with house price inflation at 3 percent.
“Taking into account current Consumer Price Index (CPI) inflation of 4.5 percent, the mid-value segment experienced lacklustre growth, while the luxury market had a disappointing year, with negative real price growth,” he said.
De Kock said that realistic local forecasts showed that GDP would grow between 0.75 percent and 1.5 percent, and CPI would range between 4 percent to 5.5 percent this year.
He said the Lightstone 2019 Residential Property Forecast was developed according to tested scenarios and fluctuations in the prime lending rate of between 0.5 and one basis points.
“As can be expected, the first quarter of 2019 will continue on a similar slow downward trend within the constrained economic environment,” said De Kock.
He said that when analysing three different scenarios for the property market, as modelled by data scientists at Lightstone, if the market followed the mid-road scenario, it would end the year in a similar position as it did last year.
“On the positive, though, should the economy fundamentally strengthen and significantly boost buyer confidence in the market, it could not only end in a high road scenario but has the potential to break through this forecasted percentage.
“The latter scenario was not explicitly modelled during the forecast but is based on intuitive expectations from a healthy, performing emerging market economy,” said De Kock.
Adrian Goslett, regional director and chief executive of RE/MAX of Southern Africa, said that if the country were to end the year in the high road scenario, and CPI fell to the lower end of the 4 to 5.5 percent range, as predicted, the country would have exited the cycle of house price decline that has characterised the property market for some time.
“Many choose not to purchase any large assets pre-election, as their decision to invest hinges around the outcome of the election,” said Goslett.
He added, however, that if the election went smoothly, it would bring confidence and certainty back to the market and the economy as a whole and hopefully be the catalyst that created positive strides in the right direction.
“This echoes what many real estate experts predict for the 2019 property market and strengthens the argument that now is the ideal time to purchase property. My best advice for investors and first-time buyers to enter the market as soon as possible, in order to get in before prices begin to climb,” said Goslett.
De Kock said that in the run-up to the national elections uncertainty would most likely increase in the property market.
He added that the debate over land reform was expected to continue to influence buyer confidence in the residential property sector, in particular.
However, De Kock said there were early indications based on the data that the property industry could experience a robust recovery this year.