Despite water shortages, the market is poised to react positively
Politics, it seems, trumps drought when it comes to the property market, and experts believe the change of guard in the government could have a resoundingly positive effect on property.
Experts say sentiment began to improve in December when Cyril Ramaphosa was elected ANC president, and last month saw property sales in the Western Cape defying the drought and showing its best January sale in three years, according to the latest Lightstone statistics.
This week, the resignation of Jacob Zuma as president of the country, the swearing in of Ramaphosa, and even the sight of Ramaphosa jogging with former Finance Minister Trevor Manuel on the Sea Point promenade, all upped consumer sentiment.
“No interest rate reduction will ever have as great an effect on the economy as a positive change in sentiment among South African consumers,” says Adrian Goslett, regional director and chief executive at Re/Max of Southern Africa .
“If nothing else, the country has been given hope of a new dawn that hopefully will kindle the South African spirit of dreaming big. For most people living in the country, home ownership is that big dream.”
Erwin Rode of Rode & Associates believes Zuma’s resignation will “undoubtedly lift confidence levels all round, although property prices are not driven by emotions but rather by fundamentals”.
“I do not expect the fundamentals to change soon, so I do not expect the new president to have much influence on house prices in the short term.”
Rode warns that the strengthening of the rand, which immediately followed Zuma’s resignation, makes home purchases by foreigners more expensive and reduces the numbers.
“However, at the same time, the rand is strengthening because foreigners now have more confidence in the future of South Africa. One cannot separate the influence of these two opposing forces.
“Nevertheless, on balance I believe there will be a slight increase in foreign interest in the South African property market, especially in Cape Town’s Atlantic Seaboard. But do not expect this to affect house prices in these areas.”
For the country, FNB’s household and property sector strategist John Loos says he still expects house-price growth to move up into the 5% to 6% range for 2018, from 3.7% last year.
But he does not believe this is as a result of Zuma’s departure.
Based on the improved sentiment at the start of the year, partly due to party leadership change in December, along with leading indicators pointing towards mildly improving economic performance this year, I expect a mildly stronger housing market.”
Seeff Property Group chairman Samuel Seeff says a positive influence is already being seen.
“As we saw in the mini-property boom of 2014 to 2016, just a slight improvement in the economy was an excellent boost for the property market and the benefit of that is a notable knock-on to the economy. Property price growth improves as people feel confident about investing in property and developers feel confident about investing in developments.”
Seeff says a good property market boosts government coffers as more transfer duties are paid.
Pam Golding Properties chief executive Andrew Golding says sentiment internally and externally will “exponentially improve, which ultimately will have positive spin-offs for the residential property market”.
Lew Geffen, chairman of Lew Geffen Sotheby’s International Realty, is “extremely bullish” about Rhamaphosa’s ability to lead South Africa into a period of economic prosperity. “He is a man of action. He understands business, and in property market terms we’ll see equilibrium returning very soon.
The fact that the upper end of the market has already started moving again this year shows investors are regaining their appetites for the long game, and the ‘wait and see’ period is ending.”
Geffen also foresees far more activity in the market.
“There will be more stock, and buyers will invest with much greater confidence than they’ve felt in a long time. We’ll also start seeing a price recovery across the country, with steady and stable growth being the hallmark of the year.”
However, Rowan Alexander, director at Alexander Swart Property Group, says we should not expect property prices to sky-rocket overnight – this would be seen in the medium to long-term.
Although Alexander doesn’t think the stronger rand will deter foreign buyers, the greatest issue threatening these buyers is the ANC’s talk about expropriation without compensation.
The renewed confidence in the market will have South Africans feeling that investing in property is a worthwhile exercise, says Rob Stefanutto, group managing director for Dogon Group Properties.
“The impact of this decision on the international front can be seen by the rand’s strengthening. It bodes well for the property industry on the whole.” Dogon’s chief executive Denise Dogon says: “We are very bullish about the future of the property market post-Zuma (and we) anticipate a serious upswing in property activity.”