Good time to get foot on property
Entrepreneurs take advantage of financing to become inner city developers
With the average price of a home being R1.1-million, property is unaffordable to many South Africans, particularly first-time buyers, who would have to come up with about R9 800 a month to repay a R1-million bond at the current interest rate of 10.25%.
But good news for buyers is that property prices have not escalated over the past few years. Prices in SA rose just 3.8% in 2017 and increases have been muted over the past few years.
According to the FNB House Price Index, house prices in SA grew by just 2.3% year-on-year in February, down from 3.8% in January, and from 2017’s high of 5% reached in November. In “real” terms, if one takes inflation into account, house prices are actually falling.
According to real estate investment company Lightstone, house price inflation was 4.2% at the end of January with market activity stabilising after a slowdown in previous months. Prices in the Western Cape continue to rise fastest – at 10.8% – but in Ekurhuleni, Tshwane and Johannesburg, prices are increasing by 2% to 5%.
Low- and mid-value prices are growing at more than 6% annually while higher and luxury prices are increasing at about 4%. FNB is expecting “a mildly stronger housing market year than 2017”.
While prices so far this year reflect “the weak sentiment and market conditions late in 2017 still feeding through”, FNB says sentiment has improved.
“We remain of the expectation that economic growth in 2018 will pick up, interest rates remain stable or even decline slightly, and housing demand should be a little stronger, all of which would cause mildly stronger house price growth in 2018 compared to 2017.”
With some tentative signs that SA could be heading for better economic growth and positive investor sentiment, this may be a good time to buy before prices rise again.
Also positive for property buyers is the fact that interest rate increases are expected to be small, if they increase at all, and sellers are waiting longer to sell – a sure sign of a difficult climate for property.
The FNB Estate Agent Survey Activity Rating, where agents rate market activity on a scale of one to 10, showed the rating had dropped to 5.29 by the fourth quarter of 2017, down from a multi-year high of 6.78 in early 2014, and the lowest rating since the second quarter of 2009.
Agents also reported that it took on average 17 weeks and two days to sell a house by the final quarter of 2017, from less than 12 weeks early in 2016.
This indicates there is an oversupply of property – or more sellers than buyers. It may also indicate that sellers are asking more than they should for their properties and may take lower offers.
Despite the depressed market over the past few years, rapid urbanisation has led to some interesting developments, particularly the rapid development of inner city properties and the development of estate living, or gated communities like the wellknown Waterfall Estate.
About one in 10 buyers are preferring gated communities, according to Lightstone, which said towards the end of last year that there were about 7 000 estates which included over 355 000 properties.
Increasingly, buyers are looking for manageable properties, often in estates which include tight security, parks, gyms, shops and even schools, clinics and retirement sections.
Jessica Cabanita, marketing manager at Craft Homes,