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Property still a sound investment

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Sellers may have to hold out for better prices while buyers should take advantage before the market turns

Homeowners anxiously waiting for the buyers’ market to turn before putting their properties up for sale may have to vasbyt longer than they initially expected. 

At the beginning of 2020 many believed the market would shift in favour of sellers towards the second half of the year, but new data from Lightstone shows the best-case scenario could be house-price inflation of little over 0%. The decade following the economic recession in 2008 saw lacklustre house-price inflation which only peaked at 6.35% in 2014.

Fast-forward to 2019 and Paul-Roux de Kock, analytics director at Lightstone, says price growth ended just below 2%. This year began with the possibility of house-price inflation falling below 0% in the second half, and even ending with a 1.3% decline in home value in the worst case scenario.

Under the most realistic scenario, he says, South Africans can expect more of the same with house-price inflation ending “still in positive territory” but barely above 0%.

“Although the current economic status quo does not bode well for the health of the property market, the positive news is that if you are looking to purchase a home, it’s a great time to hunt for bargains.”

The grim outlook will not last forever, says De Kock, maintaining that property is still a sound long-term investment. In terms of the different value bands’ performances, the trend is similar to that experienced over the past few years, with the affordable market expected to remain the fastest-growing, and the higher end continuing to suffer at the hands of low economic growth and policy uncertainty, he says.

During 2019 the luxury property sector entered nominal house-price decline for the first time since the 2008 recession, and is predicted to experience further negative growth during 2020. “Another unique finding within the value band forecasts is that during 2020, sectional scheme growth is projected to outperform the freehold property sector with positive houseprice growth,” De Kock says.

New housing stock is also shifting towards sectional title homes to appeal to young buyers, many of whom are eager to gain a foothold on the property ladder, says Pam Golding Property Group chief executive Andrew Golding. This shift is also a result of the shortage and cost of land.

In his 2020 outlook, Golding says the recent introduction of micro-units in Cape Town’s central business district and surrounds is also a response to strong demand from first-time buyers who want a lock-up-and-go lifestyle and to enjoy downtown living. “This has been a key driver behind the shift in housing in South Africa from freehold suburban homes to mixed-use precincts and developments, and the rise of shared, third spaces.”

Golding says this is underlined by the strong demand for more affordable homes in central business districts around the country. With household finances under pressure for the foreseeable future, he believes the focus in 2020 is likely to remain on affordability, value-formoney and cost-saving – for example transport and utilities – for the bulk of the market.

This shift in buyer sentiment towards value and affordability is driving the mixed-use precinct boom that is being seen in economic hubs and principal cities around the world, says Nicholas Stopforth, director of Amdec Property Developments.

New urban precincts are not only appealing to millennials, whose sensibilities tend to lean towards “sharing” economies, but also to more affluent homeowners who are looking to downsize to smaller shared environments with superior amenities within walking distance of their homes, Stopforth says.

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