Property market will favour buyers in 2017

FNB index shows prices dropped 1.2% in real terms last year

RISING DAMP: Mixed-use developments like the V&A Waterfront in Cape Town are growing in popularity, real estate agents say PROSPECTIVE home buyers are likely to have more bargaining power this year as South Africa’s residential property market comes under renewed pressure.

Data from banks and other industry players shows that housing activity has been on a steady slide since mid-2016 on the back of a struggling economy, higher interest rates and mounting consumer debt.

For 2016 as a whole, average house price growth slowed to 5%, down from 7.2% and 6.5% for 2014 and 2015 respectively, according to the FNB house price index released this week. House prices actually declined 1.2% in real terms in 2016 after adjusting for inflation.

On a monthly basis, FNB’s index recorded a measly 1.3% increase in December. That’s the lowest growth recorded by FNB since May 2011, significantly down from the 6.9% level still seen in April last year.

Absa has not yet released its house price figures for 2016 but they are likely to mirror the declining trend. In October, the bank recorded its lowest level of price growth (3.2%) in four years for properties priced up to R4.4million.

Sales volumes are also down, with preliminary data from property intelligence company Lightstone suggesting that the number of houses sold across South Africa may well have dipped below 300 000 in 2016. That’s a level last seen in 2009-10 when the housing market hit a post-crisis rock bottom. The drop in transactions is confirmed by the latest sales volume figures from Re/Max of Southern Africa, which point to an industry-wide decline of 15% in 2016.

FNB property strategist John Loos expects average house prices to rise by only 3% this year, despite signs of a mildly improv- ing economy to come.

“Economic growth could move slightly higher to around 1% this year, which could conceivably lead to mildly stronger household income growth and housing demand. However, for 2017 as a whole we still anticipate average house price growth to be slower than 2016 due to a very weak start to the year.”

Loos notes that the pace at which house price growth has slowed over the past eight months has been noticeably more rapid than any other downcycle recorded by FNB over the past five years. But that should not come as a surprise given market fundamentals, he said.

Estate agents are as bearish about the outlook for higher prices. But a few key trends could support the performance of different geographic areas and types of property in 2017.

Regional Re/Max CEO Adrian Goslett expects the Western Cape — Cape Town in particular — to continue to record higher price growth than any of the other provinces, a trend he believes will be boosted by the on- going semigration of upcountry buyers to the Cape and sustained foreign demand.

Pam Golding Properties CEO Andrew Golding said it would become more important than ever for buyers to understand the dynamics of the housing market to ensure they make sound investment decisions. “Factors to consider include the ongoing migration of people, supply of new housing units and lifestyle trends.”

Golding highlighted the growing popularity of mixed-use live, work, shop and play precincts, as well as secure estates and sectional title complexes, as key themes for 2017. He said another trend to watch was that of drought and rising electricity tariffs boosting interest in properties that are energy and water efficient.

Seeff Property Group chairman Samuel Seeff said: “Slower sales, stalling house prices, rising consumer debt and affordability challenges will dominate the housing market in 2017.” He believes these factors will prompt the market pendulum to shift from sellers towards buyers — good news for would-be buyers as it will allow room to negotiate asking prices.

“Demand has dipped in line with the slower economy, more property listings are coming through and buyers now have more to choose from.”

Seeff said that as the market increasingly favoured buyers, serious sellers would have to be more realistic in their asking prices. “If you go to market at too high a price in 2017, you will waste time as buyers will simply go to another property or they will wait until the price comes down. It’s that simple.”

If you go to market at too high a price in 2017, you will waste time