Weekend Argus (Saturday Edition)
Agents begin to feel the pinch after a bullish run in Cape
FOLLOWING a successful run that lasted a number of years, estate agents in the Western Cape are beginning to feel the effects of a number of market challenges.
Sentiment, they say, is that the first few months of 2018 have “been slower than normal”.
The good news, however, is that Lightstone figures remain encouraging. (See graphs right).
While Cape Town had been “a property investor’s dream for some time”, Adrian Goslett, regional director and chief executive of Re/ Max of Southern Africa, says their regional sales figures for January to March 2018 “have hinted at a change to this trend”.
House price correction and affordability challenges have played a part in this, with recent FNB Barometers also reporting a slowdown in house price growth in the Western Cape.
FNB property economist John Loos also reported a decrease in semigration figures, attributing this to the unaffordability of property in the province, but not eliminating the drought as a possible contributing factor.
Goslett says it was still too soon to tell whether or not this will be an ongoing trend for the year to come.
Grant Rea, certified sales and letting specialist at Re/Max Living, says: “Working with 70 fellow agents in an office with a large market share, I can tell you sales volumes for the first quarter of 2018 are shaky, to say the least.
“My conversations with potential renters and buyers regularly gravitate toward how to negotiate price reductions.
“We still find ourselves watching a sort of cowboy Western showdown between buyers and sellers”.
Lightstone figures, however, remain encouraging, showing more properties were sold in January this year than the previous two years’ January periods.
Hayley Ivins Downes, head of Lightstone Real Estate, confirmed that when the year-on- year average inflation value of January 2018 is compared from 2013 to 2018, the growth is positive.
“When looking at growth of each year, 2016 is by far the worst.
“This was the year when the rand took a turn for the worst and performed at almost R 17 to the US dollar,” says Ivins Downes.
According to Lightstone, South Africa’s tumultuous economic and political environment during this time is accountable for more losses in the real estate market than that of the looming Day Zero.
Although some property specialists have correctly reported a decline in the growth rate of sales in the Western Cape, this cannot be attributed to the drought alone.
This occurrence is seen across the country, and Ivins Downes says this can again be directly affiliated to the uncertainty about the country’s political future.
“Property is still the most popular investment and can provide a direct link to your CPI data,” says Ivins Downes.
Loos says: “Cape Town’s most expensive markets, including those that are against Table Mountain, have been cooling off noticeably in terms of house price growth, but this is not yet being seen in the more affordable sub-regions of the city.
“We believe that the 122.8% cumulative house price growth of the past five years has been key in leading to major affordability challenges, which ultimately must slow demand in both foreigner and local demand alike.”
The fact that the national estimate has also declined makes him “reluctant to conclude that drought conditions in Cape Town have played any significant role in this to date”.
Loos believes, however, that should the Western Cape drought not be broken this winter, it would be a dire situation for the region and could well start to impact negatively on Cape Town-specific demand from foreign buyers.
The decisions made by the credit ratings agencies are also under the watchful eye of property players and South Africans in general, says Pam Golding Property Group chief executive Dr Andrew Golding.
“While the growth forecasts for our economy appear increasingly positive, it will become evident in the coming days and weeks as to how the credit ratings agencies will respond to the Budget.”
South Africans, adds Golding, “continue to demonstrate an increasing appetite for home ownership, which is to be encouraged as it helps provide security of tenure and financial security for the future”.