Golding predicts tough but good year ahead for the property industry

S OUTH Af r i c a ’ s g r o wt h prospects deteriorated steadily throughout 2014, largely attributable to local developments rising prices, labour tensions, load shedding, transport constraints, interest rate hikes and general policy uncertainty, said Dr Andrew Golding, chief executive of the Pam Golding Property group, at a media function late last year.

However, he said the local economy was expected to improve moderately over the next few years, supported by the continued modest recovery in global growth, rising exports to African neighbours and the easing of transport and logistics constraints as infrastructure projects are completed.

“SA house prices have risen strongly since the 2008 recession ended, supported by the Reserve Bank’s aggressive interest rate cuts in response to the global financial crisis. While the increase in prices gathered momentum during the first half of 2014, the pace slowed in recent months – reflecting growing pressure on household disposable income, the impact of recent modest interest rate hikes and renewed slump in business and consumer confidence,” said Golding.

“Encouragingly, however, there is little evidence of a residential housing bubble. When adjusting for inflation, the increase in real prices since the end of the 2008 recession is marginal. In fact, when comparing house prices against disposable income and rental, the SA residential market is estimated to be neither overnor undervalued.

“And looking ahead, expectations of a modest strengthening in economic growth, coupled with an easing in the inflation rate and a very gradual series of interest rate hikes, the outlook for the residential market is positive.”

He said the rand’s sharp depreciation in recent years has made SA property more attractive to foreign buyers.

PGP’s foreign buyers of property in SA remain a small percentage of total sales (four percent), and include buyers from African countries, such as Zambia, Zimbabwe, Nigeria, Swaziland, Gabon, Angola, Burundi, Mozambique, Congo DRC, Malawi, Kenya, Namibia, Botswana and Mauritius.

“Although sales to foreign buyers include luxury homes in the R12 million to R27m price range in the Western Cape and Gauteng, the most notable increase in foreign buying was in the R400 000 to R800 000 price band, which helps dispel the myth that foreigners are pushing up prices by paying in excess of marketrelated prices,” said Golding.

He said that sectional title homes are in demand and there has been a slight improvement in mortgage lending. The earning power of the black middle class, estimated at some 4.2 million, has had, and will continue to, have a major impact on demand and growth in the res- idential property market, helping underpin its sustainability.

“We anticipate the prevailing market conditions will continue for the first six months of 2015, with high levels of buyer activity, significant shortages of appropriately priced stock and gradually increasing house price growth, against the backdrop of weak economic performance and a moderately increasing interest rate cycle.

“House price appreciation may even accelerate due to increased stock shortages and buyer confidence.

“The leisure market is already experiencing renewed interest and in the coming year the long-awaited genuine reemergence of the second home and leisure market could take place. We also expect to see wealthy investors shifting focus from the preservation of capital in cash, gold and fixed interest to equities, property and business interests.

FUTURE: Dr Andrew Golding