Up, down, up, down since the financial crisis, writes Bonny Fourie.
Reflecting on the past few years in the country’s property market, BetterBond chief executive Rudi Botha, when speaking at a recent event, highlighted the cycles and turmoil the country has survived.
These include the registering of R60billion in property at the deeds office in just one month in 2007, and only R6bn the next month. There had also been rates and taxes increases and some municipalities “in shambles”.
“And who remembers load-shedding?” The drought has been another major player in the market, he said.
This year’s discussions about land expropriation have many property owners concerned, but Botha said he believes it will be dealt with in the right way. He said he believes the country was again at the beginning of “a beautiful run”.
Home loan approval rates are already showing signs of this, with a jump from 47% approval rates last year to 60% in March this year. Cape Town rates are even higher, he said.
If you bought a residential property valued at R1million at the start of 2008, that same property would today be worth about R1.53m, but not before plummeting in value a few times over the past decade.
August 2018 will mark the 10th anniversary of the 2008 financial crisis and subsequent property market crash in South Africa. Since then, the national and local market has seen both good and bad months and years.
Some property trends that are firmly entrenched today were already sprouting a decade ago, with others growing in more recent years.
We take a look at the fluctuations of South Africa’s property market over the past decade.
Average residential property price: R755305
Average house price growth: 3.1%
Overview: This was a fragile year for the country’s property market. The global financial crisis saw many homeowners under pressure to repay their mortgages and banks were on high alert, offering homeowners help to avoid repossession. Banks reported sizeable increases in bad debt and without significant deposits it became increasingly difficult to get a home loan, or at least one with a favourable interest rate.
* Strong interest was being shown in sectional title properties.
*Youth were realising the value of home ownership.
*Modular homes were topics of discussion in the market.
*Emigration-related selling increased.
*The Gautrain continued to positively impact property prices in the area.
*Homeowners increased spending on security measures.
* It was cheaper to build a house than to buy one.
*Golf estates started growing in popularity.
Average residential property price: R729652
Average house price growth: -3.4%
Overview: South Africans were generally uneasy with spending and the median house price continued to decline this year. More properties in distress were auctioned in the early months of the year. Price growth began badly, with January’s figure at -7.2%. By December it had recovered to 2.5%, but the recovery was too late in the year to take the growth rate into the positive. Banks’ criteria for home loans relaxed and the market improved as the year proceeded.
*Although also under strain, township property markets fared better than those in the suburbs.
*Crime started pushing more residents into gated estates.
*Guest houses became popular ahead of the 2010 World Cup, and homeowners looking to score from the event worked to comply with legislation to become official accommodation providers
Average residential property price: R769257
Average house price growth: 5.4%
Overview: House prices recovered this year, peaking at 8.2% in May. The Soccer World Cup did a lot to boost consumer and business sentiment. Property sales volumes started to increase as buyers with cash or access to home loans took advantage of the price decreases and number of distressed properties on the market.
*The volume of housing units completed slowed due to decline in demand for properties during the previous two years.
*The number of new building plans approved dropped.
*Some buyers took advantage of the market for investing.
*Sub-division of residential properties became a trend in the middle and upper market segments.
*Energy efficiency in roofing was looked at by more owners.
Average residential property price: R789 837
Average house price growth: 2.7%
Overview: Although the property market was still considered to be suffering the effects of the recession, signs of future improvement were evident, giving buyers just a small window of opportunity before prices were expected to rise again. Some buyers held back, thinking prices would decline again. The introduction of the CPA made it more difficult for banks to approve large home loans.
*The number of black home buyers continued to increase, exceeding the number of white buyers.
*Sellers were forced to drop asking prices as homes stayed on the market longer.
*Retirement property development started to gain momentum.
*Eco-estates gained popularity.
*Many sellers turned to auctioneers to achieve better sales prices.
*Some held on to properties for longer, waiting for the market to improve.
Average residential property price: R838791
Average house price growth: 6.2%
Overview: Property buying trends reflected the macro-economic situation and declining affordability levels of households, much of this due to the running costs associated with property. Wage increases were also smaller. Desperate sellers flooded the market, offering properties at knock-down prices. Average house prices continued to increase. Home loan approval rates also increased, with some figures putting this rise at almost 50% year-on-year.
*Affordable housing continued to outperform other property segments.
*There was an oversupply in the sectional title market, making full title homes more popular.
*Political instability and talks of land reform affected foreign property investment.
*Home security measures remained good selling points.
*The number of residential building plan approvals was higher than the previous year.
*Residential construction picked up.
*The state channelled money into low-income housing and upgrading informal settlements.
Average residential property price: R888160
Average house price growth: 5.9%
Overview: Continued low-interest rates assisted a property market still plagued by slow house price growth. Affordability and over-indebtedness was still a hallmark of South African households. Homes remained on the market for longer. Socio-economic issues, including ongoing violent strike action, rand weakness, and high inflation rates, impacted the market heavily. The property market this year was predicted to peak in 2018.
* The appeal of security estates continued to grow.
*Buy-to-let market weakened.
*Property economist Erwin Rode said, unless buying property with cash, it was better to rent.
*Despite woes, consumer confidence improved.
*The sectional title market saw increased activity.
*Some areas saw improvement in the luxury segment.
*International buyers started to re-enter the market.
*Technology started to make bigger impacts on the property market.
*Green trends became a hotter topic of conversation.
Average residential property price: R948760
Average house price growth: 6.8%
Overview: The market was generally buoyant, especially activity related to first-time buyers and those entering the middle market sector. Most home loans granted were for less than R1million. Property prices in Cape Town soared by more than 50% in some areas, especially those with easy access to the city centre. Property prices in Gauteng also increased, although nowhere near the levels of the Mother City.
*Rental inflation rose.
*Township property development started increasing.
*Homeowners were encouraged to reconsider their high walled perimeters, which were reported to be aiding crime.
*Properties valued at R1m and under saw acceleration in their value.
*The trend towards smaller homes grew as urban land scarcity put pressure on property values.
Average residential property price: R1077055
Average house price growth: 6.1%
Overview: Technology continued to change the real estate sector for buyers, sellers and agents. Transaction volumes saw slight increases from the start of the year, and better economic growth positively impacted the market, although household finances were still under pressure.
*Virtual reality goggles were introduced in the global property market.
*House price growth started to decelerate.
*Many property investors looked to invest offshore.
*Retirement property development remained a focus of developers.
*Student accommodation promised good investment prospects.
*Young professionals made their mark, looking for estate homes and apartments in new developments.
*Urbanisation and semigration trends were major hallmarks of this year’s property trends.
Average residential property price: R1056556
Average house price growth: 4.9%
Overview: The country’s property market remained resilient in the face of a tough economy and financial market volatility. The rand weakened and Consumer Price Inflation was above the Reserve Bank’s target limit of 6%, leading to a drop in consumer confidence. Properties in good locations, such as close proximity to hubs and good schools, remained popular with buyers, and often performed better than average national trends revealed.
*Western Cape continued to outperform the rest of the country as house price inflation continued to rise.
*The sectional title sector’s performance remained superior to full title.
*Semigration to Cape Town gained momentum and house price inflation continued upwards, out of sync with the rest of the country.
*First-time buyers made up the majority of home loan applications.
*Most buyers wanted townhouses and apartments.
Average residential property price: R1096322
Average house price growth: 3.8%
Overview: Last year was said to be a buyer’s market as house price growth remained just over 4% from January to December. This was the year the drought in Cape Town coincided with a slowdown in house price growth. Traffic congestion and petrol prices saw more buyers looking for properties closer to where they work. The year was volatile on the political, social and economic fronts, with junk status downgrades hitting the property market hard.
* Activity in the below R1 million price band remained high.
*First-time buyer numbers remained low in Cape Town, but high in Gauteng.
*Micro apartments made their debut in Cape Town.
*Estates were still a major drawcard for buyers.
*More disruptors entered the market with new technological and finance models.
Average residential property price: R1103880
Average house price growth: 2.6% (up to end of March)
Overview: It is still early days, but so far, 2018 has seen an improvement in consumer confidence and a subsequent boost in the performance of the market. Price growth in Cape Town continues to slow, or normalise, as economists say. Buyer activity is predicted to improve over the year and banks foresee more home loans being approved in the coming months. Price growth reached 4.1% in January, 2.7% in February and 1% in March.
*Land reform processes saw jitters among many homeowners following President Cyril Ramaphosa’s State of the Nation Address.
*Retirement development is accelerated.
*The VAT increase and fuel hikes are impacting household affordability levels.
* Average house prices and price growth according to FNB data