Experts say SA can expect post-polls improvement in property market, but it will take time
The property market is likely to improve now that the elections are over, but it will not be an immediate recovery, say property experts. Despite much of the property market’s recent slowdown and buyer hesitation being blamed on uncertainty pending the poll, the country still has hurdles in its way.
What is needed now is for the government to “get on with the job of stabilising the country and economy”, says Samuel Seeff, chairman of the Seeff Property Group. This should be a top priority as it is essential to restoring business, investor and economic confidence.
Seeff believes the market is “perfectly poised” for momentum to begin building. “The mortgage landscape and flat interest rate combined with higher stock levels and flat price growth means buyers can find a good deal in the market right now, but they need to feel their money and property are safe, and that they can feel confident about the future of the country.”
Until consumer and business confidence is restored, Yael Geffen, chief executive of Lew Geffen Sotheby’s International Realty, believes the market will continue to tread water. “We need the government to come to the table with concrete plans to stimulate job creation, and partner with the private sector to inject some energy back into the economy.”
At best, she says, annual house price inflation is unlikely to move beyond 5% for the rest of the year as people continue “to watch and wait” while the government gets to work. “We need decisive, business- and investment-friendly policies implemented soonest.
“If we have that we should start to see recovery in the market by the beginning of next year.” Adrian Goslett, regional director and chief executive of Re/Max of Southern Africa, says increased activity is likely after the polls, but he agrees changes will not be immediate.
The election hype must subside and investors need to regain confidence in the government’s policy decisions. Any rebound following the election will occur only after the quiet winter months, believes Andrew Golding, chief executive of the Pam Golding Property.
Also, further reform measures are required for confidence to return to businesses, investors and households. Meanwhile, “the economy continues to grapple with rising petrol prices – which apart from being impacted by increased taxes, is the result of global developments (higher oil prices and a stronger dollar) which remain beyond the influence of local development.
“The post-election environment is likely to be better for the market. It is just a question of how much better. Will some market-friendly reforms be introduced? Can SARS start collecting more revenue, so easing pressure on the already over-burdened tax-paying public?”
A combination of a trouble-free election, further market-friendly reforms and an improved economic outlook are necessary for the property market to flourish again, he says.
Myles Wakefield, chief executive of Wakefields Real Estate, says at least the buying paralysis leading up to the polls should now be over. “We’ll see this stagnation easing, and buyers and sellers who have been waiting on the election results will make their decisions.”
If heightened positivity is seen, it will “definitely” lead to more qualified buyers coming back to the market and able to take advantage of available stock, says Mike Greeff, chief executive of Greeff Christie’s International Real Estate.
Uncertainty caused decline
The economic and property market decline has been a result of political and economic uncertainty and weak confidence, with serious activity seen only in the primary residential sectors below R2 million and R3m, says Seeff’s Samuel Seeff.
This activity was only seen from people who needed, or wanted, to buy. “Those with discretionary money have been waiting on the sidelines. People want to invest, but need to know their money and assets are safe.” Seeff says there is a lot of confidence in President Cyril Ramaphosa, and he has shown commitment to rooting out corruption.
However, the market needs to see this visibly translate into economic growth. Confidence, clarity and policy certainty will boost the economy and attract money.
“Even the slightest uptick in economic growth can have a multiplying effect on the property market, as we saw in the 2013 to 2016/7 growth period when sales and price growth in the high demand areas significantly outpaced the GDP growth rate.”
Seeff says property is a significant contributor to the GDP and to tax through transfer duty, commissions and bank fees. Myles Wakefield, of Wakefields Real.
Estate, says: “We now know who will be in charge for the next five years. What we want, above all, is some clarity about the way forward. The election has provided that, and it will undoubtedly impact positively on the property market.”
Re/Max of Southern Africa’s Adrian Goslett says investors, both foreign and local, are likely to wait a few months to see if any policy changes come into effect that might affect their return on investment.
Optimism and confidence are also “crucial” ingredients in a country’s property market, and Pam Golding Property’s Andrew Golding hopes a market-friendly election outcome will help create “much-needed certainty and stability”. The election will not mean a miracle for the market, says Yael Geffen of Lew Geffen Sotheby’s International Realty.
“Economies always move into a holding pattern ahead of elections, but the fact is that South Africa’s macroeconomic environment has been in a depressed state for a lot longer than a pre-election period, so the hard work starts now.”
Take advantage get on the ladder
Aspiring property buyers are advised to take advantage of current opportunities before interest rates and property prices begin to climb post election, says Tony Clarke, managing director of the Rawson Property Group.
The next six to 12 months could be a favourable time for buyers to get a foot in the market. “Price stabilisation means there are plenty of well-priced properties available, and lenders are coming to the table with some competitive mortgage rates…”
Leading up to the election, the market was strongly in favour of buyers, with an abundance of eager sellers competing to secure a sale. But Clarke believes the situation could reverse now and is hoping the focus will return to road-mapping the country’s future and that those plans will be communicated in a clear, authoritative way and lay investor uncertainty to rest.
But while clarity will stimulate the property market, he warns property owners that the road to complete market remains a long one.
Young buyers buck the trend
While property sales numbers remained low in the run-up to the elections, statistics indicate a larger than expected number of Gen X and Millennial buyers active in Cape Town, says Schalk van der Merwe, Rawson Properties Helderberg franchisee.
More than 70% of purchases in the city over the past year have been by these buyers. “That’s 6 586 transactions in total, with an average price of R2.386 million, requiring an income in the region of R75k a month.” Sales under R3million – prime territory for younger buyers – actually increased by a full percent.
“This is a positive sign for the market and provides vital stability while we all wait for a more widespread market turnaround.”
Income stress remains
The elections are over but household incomes are likely to remain under pressure in the short term, says Pam Golding Property group’s Andrew Golding.
Rising petrol prices are a challenge. However, with many renters and buyers being newcomers to the market, the lower end of the market will continue to hold up well relative to other sectors. Smaller sectional title properties will also perform better as a result, he says.
“These sectors of the market would also be those that would benefit most from a rebound or turnaround in the economy. First-time buyers are typically most sensitive to prevailing economic conditions and are a strong potential source of demand for the market.”
In areas where market price corrections have improved the perceived affordability of a property, it seems time on the market is declining and buyers are showing a willingness to purchase, Golding says.