Despite the current challenges, there are indications of resilience
Signs of an emerging turnaround in residential property activity are still evident as the housing market in South Africa demonstrates ongoing resilience.
This is despite the challenges of a muted economy and socio-political impacts, says Andrew Golding, chief executive of the Pam Golding Property Group.
One of these promising signs is a decline in “time on the market”, as buyers take advantage of improved affordability, as well as improved buyer sentiment.
“The time to sell varies according to factors which include realistic pricing in the current market and desirability of location – namely high demand, sought-after centres and key hubs, as well as other macro-economic and socio-political impacts.
“We are finding that properties of up to R4million are selling at a median period between 34 and 43.5 days, while homes in the price band from R4m to R6m sell in 76.5 days. Those from R6m to R12m are on the market for a median of 90 days, while those in the upper price brackets generally take somewhat longer to sell.”
Golding says first-time buyers accounted for just over half (51%) of all the mortgages extended by ooba during the first seven months of the year. Nationally, the price segment up to R3m remains the most active, as it is driven by factors such as affordability, with a strong demand from first-time buyers. The next most active price band is from R3m to R6m, followed by the segment from R6m to R10m.
In the luxury segment from R10m upwards, sales are being concluded but over a longer period and often below asking prices.
“However, our Atlantic seaboard office had its busiest August on record, with over R200m in confirmed sales concluded in the past month, including a R59m apartment in Fresnaye.”
Sales activity, however varies in different regions, with higher demand in sought-after centres and nodes, including the KZN North Coast and Durban.
“Furthermore, in May and June 2019, ooba data showed that the average concession relative to prime granted by banks returned to negative territory for the first time since late 2010.
“This means that fewer mortgages are being granted at less than prime lending rates.”
During the first seven months of this year, the Pam Golding Residential Property Index showed that house prices were an average of 3.71% above the same period last year. However, at a regional level, this ranges from 2.76% in Gauteng to 6.37% in the Western Cape.
“At the lower end, South Africa’s large, young population of first-time buyers combined with reduced delivery of homes for the lower end means there is a shortage of homes to meet demand,” he says. This is resulting in continued strong growth in prices in the price band below R1m – ranging from +4.81% in Gauteng to +13.39% in the Western Cape in the year to July 2019.
“The current market conditions are dominated by political and economic headwinds but there is a sense, firstly, that the economy has the potential to improve in the near term and that, from a cyclical point of view, the property market is at or near the bottom of a down cycle and hence this is potentially a good time to buy.
“Property markets through the ages have behaved in cyclical patterns and there is nothing to suggest that the current environment is systemic or permanent and so, like all property investment decisions, due care needs to be taken with location, price and resale potential, regardless of the particular market cycle.”