Property sector strategist predicts the country’s economic powerhouse will take over from Western Cape as best performer this year, but not by much
Gauteng’s house-price growth is predicted to outperform all provinces this year, taking over from where the Western Cape left off last year.
However, this outpacing will not be by much as the country’s property market, as a whole, still grapples with weak economic performance and an unclear political situation.
According to FNB’s household and property sector strategist John Loos, Gauteng has been the province that, since the end of the pre-2008 housing boom, has made the most progress in home affordability improvements – measured by average house price relative to average household incomes, reflected in stronger rates of new entry to the housing market than in other regions.
“This province is my pick for 2018 in terms of the best houseprice growth.” Loos stresses that this does not mean a particularly strong market for any region, including Gauteng.
Seeff Property Group’s Samuel Seeff says the country’s property market is seeing 2018 start under strain as fall-out from the poor economic climate of the past two years and junk status “is still with us”.
Cameron Jansen, broker/manager of Remax Central, predicts that 2017’s smaller sales turnover in most of the Joburg markets compared to previous years will continue into 2018.
However, he does believe there will be a resurgence in sales of older homes, especially in older suburbs like Yeoville, Berea, Observatory and Orange Grove.
“The incredible value for money represented in these areas is not always clearly understood. I believe we will see canny investors buying into these markets and then renting out these properties.”
Jansen believes suburbs with an average pricing under R2 million will be the ones to continue seeing growth, especially in the free-hold market.
“The ability to purchase your own piece of land and have your own free-standing home is still one of the property goals of any homeowner. The ‘luxury’ market – which is homes priced between R4m and R10m – will be the most under pressure. Although this trend was seen in 2017, I believe it will continue into 2018.”
Furthermore, as living costs continue to soar, Jansen predicts that more people will be looking to reduce their financial overheads, so the rental market will continue to grow. Eco-friendly homes will also be sought after this year.
“We are seeing that prospective purchasers buying into new developments are specifically asking for features that are seen to save energy. Features like solar geysers, gas hobs, prepaid lights and water are high on potential buyers’ priority list. “These needs will filter down into the rental market.”
Developers are also continuing to bring new products to the marketplace across a range of price bands in response to the demand for residential property in key growth nodes, says Pam Golding Property Group chief executive Andrew Golding.
In Joburg these nodes include the “new north” of Fourways and Pretoria East.
“In the major metros and economic hubs it is evident densification is a factor which will increasingly drive demand in the residential property market. In addition, the live-work-play-shop concept continues to gather momentum, partly due to major cities’ increased traffic congestion, while the transition to ‘green’ energy and water-efficient homes will gain impetus not only for the purpose of sustainability and drought.”
Other factors Golding says will continue to fuel activity in the residential property market include an increasing demand for sectional title properties in convenient locations close to the workplace and all amenities from first-time buyers and those downscaling or seeking a more manageable, lock-up-and-go property with reduced operating costs to cater for a more flexible lifestyle.
“We also anticipate a continued demand for secure estate living, both freehold and sectional title, as well as homes catering for the ever-growing, retirement market – those wishing to retain an active lifestyle and enjoy a range of amenities on site.”
In addition to ongoing development across Gauteng, large-scale growth is especially predicted for the northern and north-western suburbs of Joburg, where platforms such as Airbnb are creating interesting trends in the Sandton property market in particular. This is according to Dave Lewis, Seeff Sandton’s developments manager, who says in the Sandton CBD and surrounds there is a great drive from both developers and the municipality to increase the number of residential homes.
Areas like Bryanston and Morningside are being developed at “quite an alarming rate” as the sizes of the stands in the area are good for development and the existing services infrastructure already exists.
Here, he says, a lot of townhouse and apartment developments are going up. “Interestingly though we have also seen average price per square metre coming down in the past year as there is a lot of competition in the market,” he says.
“With the upturn in the shortterm rental market, investors are realising higher returns for their money with something like Airbnb than they get with placing longer-term rentals. This is an aspect that is keeping them interested and is aiding in sales still ticking over.”
Chris Hajec, Seeff’s managing director in Randburg, says the area and its well-known suburbs are, at the moment, a development epicentre for affordable, entry-level homes as developers here target the first-time home buyer and buy-to-let investors markets alike. “We have seen a boom in residential development in Randburg despite – and actually in reaction to – the dip in the market after the downgrade, and 2018 does not seem likely to manifest a slowdown of any discernible level.”
Downsizing from large and expensive-to-maintain and run homes is a definite trend in cities like Joburg, says Herschel Jawitz, chief executive of Jawitz Properties, and over time this trend will put pressure on property prices for these types of homes. With a slow economy, low consumer confidence and price-sensitive consumers, the key driver for buyers is value – a combination of position, price and size – at virtually every price level.
“We are even seeing this at the top end of the market. Supply often exceeds demand with cautious buyers spoilt for choice. Buyers are looking for the best deal they can get, showing no fear of loss or urgency if they cannot get the property they want where they see value.
“This includes a reluctance to get involved in significant improvements to a property, believing they can pay the same value-driven price for a home that is ready to move into.”
Despite a challenging economy, Jawitz says first-time home buyers continue to show strong interest in the market, especially in the sectional title market, which offers low maintenance, secure and affordable living. Buyers are also benefiting from increased competition among the banks, he says.
“We saw a gradual improvement in the rate concession from the banks in 2017 and expect this trend to continue in 2018.”