Positive signals for South Africa's Residential Property Market

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Recent signs of the recovery in South Africa's Residential Property Market, according to Dr Andrew Golding, include the recent increase in sales volumes, rising values and growing demand. Recent signs of the recovery in South Africa's Residential Property Market, according to Dr Andrew Golding, include the recent increase in sales volumes, rising values and growing demand.

AT last there is good news for the South African residential property market following slow but promising signs of a healthy recovery in the wake of the 2008 world economic recession.

Recent signs of the recovery, according to Dr Andrew Golding, CE of the Pam Golding Property Group, include the recent increase in sales volumes, rising values and growing demand.

All these, Golding points out, show the recovery back to the normal trading conditions.

"These promising situations just go to show how dynamic the residential property market, undoubtedly always on the move with buyers and sellers entering into transactions for a wide number of different reasons ranging from relocation for work or lifestyle, first-time ownership, downscaling or up scaling and getting wise investment, or simply putting down roots," said Golding.

He pointed out that sudden resurgence of investors because of big demand for, among others things like rental accommodation, sustained growth in middle class sales among the so-called 'emerging black middle class and yearning for a place that offers great security and easy access to and from work or school are some a much need welcome to boosting the market recovery.

On the negative side, though, a number of factors harming the resurgence of residential property market in South Africa include limited access to mortgage bonds, fewer homes entering the market and the re-emergence of the über prime sales to local and international buyers.

"The recent half percent increase in the interest rates was a surprise because it happened sooner than expected but also appears to have been priced in by the market as an upward trend in interest rates during the course of this calendar year (2014). This comes as no surprise at all because many commentators had predicted this earlier," said Golding.

Bank analysts also report some nominal growth in the residential property market of between five to eight percent.

One of this country's property market analysts, Lightstone, recently reported of a 6.9 growth in sales transactions last year in December over 2012 and a 21% growth in total sales values.

"In the meantime, the residential property market continues to improve. Values appear to be outpacing volumes, which is encouraging since sales volumes at the moment are being hindered by a lack of stock or slowing demand," said Golding.

These factors are a signal to the market while it is also a frustrating period for buyers as well.

However, Bill Rawson, chairman of the Rawson Property Group, says it is now estimated house price growth will stay above 8 percent for the coming year and rentals have risen nationwide by over 6 percent with 9 percent plus being the norm in many of the high demand urban areas.

He points out that some analysts have said that residential property is now overpriced and that the price ‘bubble’ is about to burst.

“I do not accept this view, while it is true that all consistent property rises eventually result in a bubble, which in one way or another ‘bursts’.”

Rawson says South Africa’s prices will continue to rise for the foreseeable future because demand for both owned and rented property is so strong at the moment, far stronger than supply is able to meet

Currently, he says they have 13 000 properties for sale and I calculate that the majority of these have experienced at least a 4 percent year-on-year rise in value.

Furthermore, if correctly priced, it is clear from our figures that they tend to sell within eight weeks.

Properties at the top of the price bracket, especially those above R10 million still lack buyers and in some cases have to be discounted by as much as 40 percent when sold.

“In our economy, homeownership has to be stimulated and encouraged – and private enterprise could and should play a part here, for example by making low interest rate housing loans available to loyal employees or by guaranteeing bond payments for such people.”

He points out that no government in world history has ever fully caught up with the housing backlog without the help of the private sector.

According to Rawson, two factors make the stimulation of homeownership vital.

The first is that, although they form a significant part of the annual budget, our pension payouts still leave many people semi-destitute and on the brink of poverty.

Secondly, in a country like ours where the inflation rate is said to hover around 6 percent and will almost certainly not go below 5 percent, a home is the one investment that can be relied on to outperform inflation and thereby compensate for a low level of retirement benefits.

It is these factors which make South Africa so different from fully developed First World countries like Germany, where people can happily rent all their lives and still enjoy a well provided for old age.

“That is simply not possible here in South Africa and we have therefore to foster homeownership as a means of compensating for under-resourced retirements,” he adds.


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