Leaders in the property industry say this is the best time to purchase, and Gauteng’s biggest city is where properties are most affordable
South African consumer confidence is slowly on the rise, so there is no better time than now to buy property, especially in Joburg where house price growth has declined.
The tax increases announced in the Budget speech will no doubt make it more difficult for potential buyers to afford bond repayments, but those who are still looking to buy property in the coming months can be assured it will be a good decision.
The fact that any property up to R900 000 is still exempt from transfer duties is good news for today’s buyers, while the low CPI and the strong rand will increase the possibility of lower interest rates, says Jacques du Toit, senior property economist at Absa Home Loans.
“This can have a positive effect on the property market in the long run.”
The latest FNB Property Price Index disclosed, other than the Western Cape, property prices in almost all parts of the country declined in real terms after inflation. Whether purchasing a Joburg house to live in or let, buyers can get them in the current market at fair value, or even below.
This is according to Jawitz Properties chief executive Herschel Jawitz, who says buyers have a “fantastic opportunity” at current prices.
“Despite being the financial hub of the country, the residential property market in Joburg has been among the slowest, with price growth on average below inflation in 2017. With more sellers than buyers, value – the combination of size, location and price – has been a key criterion for buyers in Joburg, who are spoilt for choice.”
He says it will take time before the surplus stock is taken up by buyers coming back into the market.
“As in most parts of the country, the Joburg residential market is offering fair value to buyers.”
In addition, the first quarter of the year traditionally sees increased activity in the property market and this, together with a stable outlook for the economy, bodes well for brick and mortar investments made now and in the near future.
Over the past year, banks have also been “very willing” to do business, offering great finance deals, says Rowan Alexander, director of the Alexander Swart Property Group.
“These are exciting times for the property market as consumer confidence is on the rise. The property eco-system is healthy and it is a good time to invest.”
There is also an expectation of more realistic buying and selling prices, says Mike Greeff, chief executive of Greeff Christie’s International Real Estate.
“There is also a strong sentiment that interest rates will remain unchanged for the next six months and that is a big plus for individuals looking to finance their homes.”
Dogon Group Properties also anticipates a “serious upswing” in property activity, especially in Gauteng, where chief executive Denise Dogon says there are still quality, affordable properties on offer.
“This is definitely a very good time to purchase property in South Africa.”
Jonathan Davies, Gauteng regional director for Tyson Properties, is not convinced a market upturn is around the corner.
“Historically, property in South Africa has always been a good investment in the long term, which perhaps raises the question around investment in the current economic climate. In general prices are still quite high. We have seen a correction since 2008, but my feeling is we are still some time away from a more stable growth scenario.
“We have had positives changes in the government and interest rates are reasonably low, but we require good sustainable growth in various sectors before we see a true upturn in the market.
“The macro economic environment is still reasonably unstable with projected growth low and although sentiment has improved it may not be enough to stimulate the market substantially.”
He believes while investing in property for 10 years or more will see good returns, investing for a shorter period will not be as rewarding. However, those who are buying now can be assured Joburg property has good prospects.
“Looking at Joburg’s skyline dotted with cranes and construction tells the tale of continued growth and expansion. Companies are investing and there is still a good demand for property both old and new.”
Jawitz says buyers will find better value once they move away from the heart of the city’s northern suburbs and Sandton.
“For investors, the buying decision is far less emotional and focuses on both yield and capital return, which depends on area and price. Areas like the Sandton CBD offer a strong rental market, but property prices are higher than areas further north, like Fourways. ”
Property is a longer-term investment so buyers need to make sure they do not get into a position where they have to sell because of financial pressures. In the current market, he says that timeline is about five years.
“When it comes to buying a new property versus a re-sale, even though you are buying an older property, re-sale properties simply by square meterage are selling for about 15% to 30% less than a new property of the same size. However, the rental and capital returns may not be as high on a re-sale as they would be on a new property.”
From an affordability, maintenance, and security point of view, apartments and townhouses are the most popular across Joburg, Jawitz says. Because there will be more buyers who can afford to buy properties at lower prices, there will always be more sales in the sectional title market.
Buyers should look to suburbs offering security, ease of access to schools and highways and where investors have bought historically, says Davies. Areas like The Parks in the older suburbs offer good growth as the property markets there are active. Sales occur frequently and the average ownership tenure is shorter.
“The suburb activity here generates growth as new families move in to gain access to schools while others move out to destination suburbs. Further north the new development of Fourways offers a good investment opportunity. Newer homes and a different lifestyle drive this market, and as it continues to grow a new business hub will emerge bringing with it growth.”
Younger families still look for leafy green properties where children can play, while others prefer the lock-up-and-go lifestyle of secure living, Davies says. For investment buys, the more secure homes attract better rental incomes and better returns.
“Secure estates such as Fourways Gardens, Dainfern and Kyalami often attract a higher calibre of tenant and a higher rental.”
Looking at the next six months in the Joburg property market, Jawitz says: “We are starting to see early signs of improved consumer confidence and buyer enquires in 2018.
“However, this improved activity is off a very flat year in 2017 and it will be some time before this increased activity translates into better growth in prices and higher sales volumes. In terms of property price growth, I think the market has bottomed out and we will start to see a gradual increase in the rate at which property prices grow in 2018.”
He says buyer caution could also continue until more positive developments are seen from the new president.
“There is no doubt, however, any increase in optimism, even small, will begin to move the residential market.”
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