The country’s real estate market has struggled this year, but is expected to lift after next year’s elections
This year has been challenging for the country’s property market with political instability, rising inflation, recession and record fuel prices the major hurdles.
While the situation is predicted to improve in 2019, experts say this is likely to occur in only the mid to later part of the year.
“Despite all the challenges, the real estate sector has remained more buoyant than many expected,” says Mike Greeff, chief executive of Greeff Christie’s International Real Estate, adding that the outlook for 2019 “seems quite promising”. He says the results of the election will provide more clarity.
“Foreign investor confidence is also gradually on the rise due to Moody’s rating the country as stable. The Cape water crisis, which dampened the market, has been averted and the Reserve Bank has kept repo rates stable for the time being, despite calls for an interest rate increase.”
The market is likely to enter 2019 on much the same foot as it is right now, says Samuel Seeff, chairperson of Seeff Property Group. Patience will be needed as it is likely to “remain fairly flat” for the first few months of the year. He says among the positives is that elections will take place in May.
“Once the elections are out of the way, and we get a positive result which reinforces a mandate to President Cyril Ramaphosa to continue with his reforms, we will see this translate into more positive sentiment for the economy and property market.”
In addition to the market lifting towards mid-2019, Seeff says the Cape is likely to see a “better year”, given the water crisis has subsided.
Interest rates are at relatively low levels and Pam Golding Properties chief executive Andrew Golding says it appears likely they will remain “on hold” until early 2019. However, there are several “moving parts” which could alter the timing of the first interest rate increase in the next interest rate cycle.
He says 2019 appears likely to be the year in which the Cape regional market moves back in line with the rest of South Africa – with Gauteng and KwaZulu-Natal the relative out-performers – although this is unlikely to be to the same extent as the Cape’s out-performance in recent years.
“It is likely to be another challenging year in the housing market, but with flourishing growth nodes and smaller towns which were previously considered holiday towns enjoying a revival in fortunes.”
Much of the positive change will only occur after the general elections, says Yael Geffen, chief executive Lew Geffen Sotheby’s International Realty. The country will also have to get through February’s State of the Nation Address.
“This will hopefully not focus on land restitution because the international community will be watching closely. Eyes will also be on the 2019 Budget.”
Geffen says consumer spending always moves into a conservative cycle ahead of an election, and he also predicts the market turn-around in both volume and return will start shifting from the middle of 2019.
He says: “The last two quarters of this year should be fairly good for real estate across most price bands. The 2018 real estate year, while challenging at times, has provided valuable insight into the psychology of the market. If current trends continue, market growth is expected to hover around 3%-4% for the next 12 to 18 months.
Festive spenders feel the pinch
Early in the year, there is likely to be a decline in household budgets, as consumers overspend during the festive season, often on credit, says Seeff’s chairperson Samuel Seeff.
This usually impacts housing bonds and rents which tend to be the first to feel the effect of consumers unable to meet their monthly commitments. The country is also likely to see the first in a series of interest rate hikes once the MPC committee meets towards the end of November, he adds.
“The expectation is that the interest rate will rise by up to 2% over the next 18 to 24 months and this will impact the demand for property, household wallets as bond repayments will rise and also general costs which will rise as a result of a higher interest rate.” This all affects consumers’ affordability levels.
Offshore homes entice investors
South Africans’ appetites for offshore property continues, says Pam Golding Properties’ Andrew Golding.
Investors want to diversify their portfolios, acquire property which includes permanent residency, and provide an offshore investment bolt-hole.
“The Portugal EU Residency programme remains the most popular. South Africans like the fact that Portugal forms part of mainland Europe. Notably, Portugal still offers exceptional value for those considering relocating there, as well as appealing tax benefits.”
Cyprus is a popular offshore prospect while, in Grenada, one can acquire citizenship by investing in government-approved real estate developments.
Mauritius is also a sought-after destination for South Africans. while Eden Island in Seychelles has developed into a vibrant and cosmopolitan community.