Weekend Argus (Saturday Edition)
Future of housing industry lies in political hands
CAPE Town’s appeal as a soughtafter place to live is expected to keep the city’s property industry ahead of the South African pack in 2018, but the eyes of property industry stakeholders and role players will be firmly on the ANC’s national electoral conference next month before they put money on it.
Most are, however, tentatively optimistic that the city and Western Cape will survive any undesirable outcomes.
“I am optimistic the Cape Town property market will remain buoyant throughout 2018 despite the political and economic mess in which we find ourselves,” says Dogon Group Property’s Denise Dogon.
“As long as mortgages are available at current interest rates, and despite economic ups and downs, I am optimistic the market will keep going, and as the recession deepens Cape Town will show growth as a result of a large-scale migration from other metros.”
This semigration-driven growth is what sets Cape Town apart from the rest of the country, says Rode & Associates’ Erwin Rode. However, growth in Cape Town has been decelerating throughout the year, and prices “surely must be nearing the ceiling of affordability, given the stagnating national economy”.
“An additional negative factor is the drought, which is affecting economic activity, especially agriculture. I expect an average growth rate of about 5% for 2018.”
The political upheavals and policy statements at national levels this year, and the resulting international ratings downgrades, have shaken investor confidence. The market is clearly taking a “wait and see” approach to the ANC’s conference that starts on December 16, says Lew Geffen, chairman of Lew Geffen Sotheby’s International Realty. How the market performs in 2018 is largely going to depend on the outcome of that conference.
“A leadership status quo will probably see the market’s downward trajectory continue, while substantial changes to a leadership untarnished by recent scandals will see a rise in investor confidence across the board and the property industry will show tandem recovery.”
Though a slide into negative territory in 2018 is unlikely regardless, Geffen says since the buoyancy of this market is largely dependent on semigration, if the conference doesn’t deliver the results the populace seeks, Cape Town’s prices will become increasingly out of reach for all but a small pool of buyers.
“If it does, Cape Town should perform reasonably well next year.”
Knight Frank managing director Susan Turner agrees that political instability and a weakening rand have affected affordability levels, and even though the 2018 market will be “stable”, sellers should be realistic about prices. She says Cape Town “may be insulated from some macro-economic factors that affect other parts of the country”.
Greeff Christies International Real Estate remains positive about the local market in 2018 and does not foresee unusual or extreme price fluctuation, says chief executive Mike Greeff. Demand remains high and willing investors will continue to experience positive returns, he predicts.
While house price growth in other metros seems to be losing momentum, Cape Town looks set to be the only one that, in the next few months, will still outperform relative to the national average, believes Pam Golding Properties National and Cape general manager Richard Day.
Cape Town’s international profile and reputation as a well-run city with a thriving tech industry are among the catalysts driving the metro’s resilient property market.
“We are therefore seeing significant growth in housing markets in and around the city centre. A recent survey by Pam Golding Properties agents indicates that 27% expect a 0% to 5% increase in property prices in the next year and 25% expect no change.”
Continued demand for sectional title properties in major growth areas is also expected. Estate living, particularly those with green features, will be sought after.
“We could see a marked improvement in the property market after next month, once we have a better idea of the political direction in which the country is headed. The pent-up demand from potential buyers and sellers who may have been unwilling to take the plunge this year could lead to renewed market activity in 2018,” Day says.
One cannot overlook the fact that the finance minister painted a bleak outlook in his mini budget, says Seeff chairman Samuel Seeff, emphasising that South Africa is in a tough economy and the property market is getting tougher. This is a period of extreme prudence for the property market.
“That said, provided there are no economic upheavals in December and no further poorly conceived cabinet reshuffles and political dramas, we expect the market to remain on par with this year, if sellers heed the pricing calls.”
While the market is slower, Seeff says it is still in a better position than it was following the global financial crisis of 2008.
“Based on the current state of the economy and providing there are no upheavals, we do not predict any further dramatic slow-down or price drops.”