House prices can improve this year

While the fourth quarter property statistics revealed by South African bond originator ooba, confirms that 2017 was a very tough year for the property market, optimism is growing for this year.

“The property market is significantly influenced by sentiment and consumer confidence,” said Rhys Dyer, CEO of ooba.

“Increased political uncertainty, low economic growth and inflationary pressures caused property buyers to ease off on new property purchases during 2017. Reduced demand forced sellers to adjust their prices to meet the demands of a more cautious buyers’ market, resulting in negative price growth in real terms when inflation is factored in.”

Looking ahead, Dyer believes the election of Cyril Ramaphosa as president of the ruling party at the recent ANC elective conference has created a more investor-friendly political and economic environment.

“We hope that the economic policy uncertainty will stabilise,” said Dyer.

“We expect the new leadership to deliver improved policy certainty. If this happens, consumer sentiment will recuperate and boost demand in the property market. This, in turn, will drive increased property price growth over time.

“We can then expect the yearon-year property price growth to rise by 6% for the last quarter of 2018, compared to only 1.4% achieved for the fourth quarter of 2016,” said Dyer.

Despite economic drawbacks, ooba’s Q4 2017 statistics indicate more favourable home loan conditions. The banks’ home loan books have performed well, with historically low levels of bad debts and arrears.

“It appears as if consumers are managing their debt well, with consumer-affordability measures still improving off the highs of 2008 and 2009. As a result, there is strong competition among banks to lend to home buyers. We expect a buoyant home loan lending environment in 2018.”

Improved lending conditions are evidenced by the increase in the ooba approval rate from 72.8% in Q4 2016, to 73.6% in Q4 2017. The average interest rate ooba achieved for its customers also improved considerably from an average of 0.39% above prime in Q4 2016, to 0.18% above prime in Q4 2017.

“With the rand significantly stronger and inflation well within the target range, we could see an interest rate reduction early this year. All in all, the early signs are there for a robust year of growth in the property,” says Dyer.

“The current market presents an opportune time to invest in property before any good news in the economy factors into higher property prices.”