Ex­ter­nal fac­tors turn op­ti­mism to cau­tion

But de­spite con­cerns, some ex­perts be­lieve the Cape Town prop­erty mar­ket re­mains re­silient

Weekend Argus (Saturday Edition) - - PROPERTY - BONNY FOURIE

THE DOWN­HILL slide to the end of 2018 could be more an up­hill strug­gle for the coun­try’s prop­erty mar­ket, with ex­ter­nal fac­tors leav­ing it fac­ing a bleak out­look.

South Africa’s slow econ­omy and ris­ing liv­ing costs chis­elled away at the op­ti­mism felt at the start of the year, leav­ing the “Ramapho­ria” ef­fect now pretty much non-ex­is­tent.

Added to this is un­cer­tainty sur­round­ing land ex­pro­pri­a­tion with­out com­pen­sa­tion and its ex­pe­di­ence ahead of the gen­eral elec­tion next year, says Stu­art Man­ning, chief ex­ec­u­tive of the Se­eff Prop­erty Group.

House­hold bud­gets are un­der se­vere pres­sure due to ris­ing costs, the most re­cent be­ing yet an­other petrol price in­crease.

“The econ­omy is char­ac­terised by low in­vest­ment, con­strained con­fi­dence and un­cer­tainty about prop­erty own­er­ship. The rich and those with money to spend on houses are hold­ing back, which is con­cern­ing for the mar­ket.”

Af­ter the out­come of last year’s ANC elec­tive con­fer­ence, Arnold Maritz, South­ern Sub­urbs co-prin­ci­pal for Lew Gef­fen Sotheby’s In­ter­na­tional Realty, says many in the real es­tate mar­ket ex­pected a fi­nan­cial re­cov­ery fol­low­ing the rand strength­en­ing and the pos­i­tive GDP growth in the first fi­nan­cial quarter.

On the con­trary, buy­ers are now more cau­tious and is­sues such as how to fund free ter­tiary ed­u­ca­tion and prop­erty ex­pro­pri­a­tion is mak- ing them more ner­vous, Maritz says.

The re­silience of Cape Town’s mar­ket is be­ing tested with the vol­ume of sales drop­ping by just over 17% on a year-in-year ba­sis, and by about 2% when com­pared with the last six months of 2017 to the first six of 2018.

De­spite this, Man­ning says the or­di­nary hous­ing mar­ket con­tin­ues to tick over, with the Joburg and Pre­to­ria metro mar­kets seem­ingly bet­ter off than Cape Town’s.

Some re­gions

show prom­ise

How­ever, these busy ur­ban mar­kets are usu­ally the first to feel the re­cov­ery as it tends to fil­ter through to coastal mar­kets, in­clud­ing Cape Town, af­ter­wards.

“The Cape Town mar­ket has seen a cool­ing off af­ter a rapid rise in prices over re­cent years,” says Richard Hardie, chief ex­ec­u­tive of Knight Frank Res­i­den­tial South Africa.

He says the ef­fect of the drought must not be dis­re­garded as this has had a big­ger im­pact than most peo­ple re­alise, es­pe­cially af­fect­ing sem­i­gra­tion.”

In Jan­uary 2018 FNB an­tic­i­pated growth of 5% for the year ver­sus 3.7% the pre­vi­ous year, but just three months later, re­ported yearon-year growth of only 2.6%.

This, says Jo­han van Bosch, prin­ci­pal of Just Prop­erty in Clare­mont, leaves a lot of catch­ing up to do to reach 5%.

“The sur­prise was Cape Town with growth of only 1.5%, way be­low the na­tional av­er­age. This com­pares with 10.9% in sec­ond quarter 2016.”

Al­though there have been re­ports of high in­vestor con­fi­dence in South Africa, Adrian Goslett, re­gional di­rec­tor and chief ex­ec­u­tive of Re/Max of South­ern Africa, says many in­vestors are choos­ing not to en­ter any new projects un­til the fu­ture be­comes clearer.

Some re­gions, how­ever, such as KwaZulu-Natal and Gaut­eng, con­tinue to show prom­ise.

Quot­ing from a first quarter Stan­dard Bank in­dex, Goslett says pro­vin­cial in­dices con­trib­ute the mild growth in the na­tional house price largely to KwaZulu and Gaut­eng. On the other hand, the Western Cape – Cape Town in par­tic­u­lar – is show­ing its low­est growth rates since the sec­ond quarter of 2014.

“This, how­ever, is un­sur­pris­ing as most real es­tate pro­fes­sion­als pre­dicted that val­ues in this mar­ket were be­gin­ning to over-in­flate, and that a nat­u­ral re­align­ment would even­tu­ally oc­cur.”

De­spite the cur­rent mar­ket sit­u­a­tion, Mike Gre­eff, chief ex­ec­u­tive of Gre­eff Christie’s In­ter­na­tional Real Es­tate, be­lieves the prop­erty mar­ket in Cape Town re­mains re­silient and “should still ex­pect good gains and good re­turns on in­vest­ments”.

“With Day Zero averted for the next two years, the im­me­di­acy of the wa­ter cri­sis is over, and we be­lieve Cape Town will have a good chance to pre­pare ad­e­quately for any fore­see­able wa­ter is­sues.”

To add to the op­ti­mism, Nick Pear­son, re­gional di­rec­tor of Tyson Prop­er­ties Western Cape, be­lieves there have been “some fan­tas­tic de­ci­sions” made by the coun­try’s lead­er­ship, and that within a year from now, South Africa could ex­peri- ence “very good eco­nomic growth” and be­come one of the world’s top emerg­ing mar­kets.

“How­ever this is go­ing to take a lot of hard work.”

PIC­TURE: PIXABAY

Cape Town’s prop­erty mar­ket has not only been hit by the drought, but also by eco­nomic and po­lit­i­cal fac­tors.

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