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Will 2018 end on a high note for the residential property market?

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Experts hope the final quarter will save difficult, lean year

All eyes in the residential property market are on the facts and figures emanating from the last three months of the year, in the hope that 2018 will end on a positive note.

The property market has been battered by the economic climate, rising fuel prices and other increasing costs of living.

But while the effects of the economic, political, and climatic pressures have been “undeniable”, says Schalk van der Merwe, franchisee at the Rawson Properties Helderberg Group, the fourth quarter could be the turning point that kickstarts the Western Cape’s property market back into high gear.

He attributes this positive outlook to progress in three of the key areas responsible for the past year’s property contraction: the drought crisis, a decrease in semigration, and an uncertain political environment.

“The drought hit the Western Cape hard on many fronts. Not only did we get significantly fewer local and international tourists we also lost many of our upcountry buyers as semigration dried up right alongside our water.

“After some much-needed winter rainfall, however, our dams are now at around 75% capacity. That’s going to do a huge amount to stimulate both tourism and semigration once again.”

Semigration, Van der Merwe says, has become a major driving force behind Western Cape property trends, with 48% of buyers in the province in recent years coming from out of town. This figure has declined dramatically over the past year, but things could soon change.

Semigration to the Western Cape is expected to pick up again and help boost the market. Picture: Supplied

“Having pulled through our water crisis, I think we’re going to head right back up to the top of the list of most desirable places to live in South Africa.”

And even though fewer South Africans are willing to commit to long-term investments during a recession, he believes President Cyril Ramaphosa’s recently released economic stimulus plan will do much to renew investor confidence and help relieve current economic pressures.

More positive news is that, although house-price growth effectively stagnated in Q3 (July to September), home loan approval rates are on the increase, says Rhys Dyer, chief executive of bond originator ooba.

Statistics released by the home loan company ooba show that year-on-year from Q3 2017 to Q3 2018, the growth in the average house purchase price effectively remained static with a 0.1% increase.

The good thing about slowing property price growth is that property becomes more affordable, especially for first-time buyers.

“Cheaper property prices, coupled with easier access to credit with lower deposit requirements from the banks, favours buyers.”

Dyer says banks are competing with each other by making loans more accessible and affordable, which signals their confidence in how consumers are managing their debt.

“This is illustrated in the significant increase of 4.6% in ooba’s approval ratio from 73.9% in Q3 2017 to 78.5% in Q3 18.”

Homebuyers are also benefiting from the banks’ increasingly competitive interest rates which are making home loans more affordable.

Ooba’s statistics for Q3 18 show that the average interest rate is 15 basis points cheaper year-on-year.

“The average rate that ooba achieved for its buyers in Q3 2018 was 0.16% above prime compared to 0.31% above prime in Q3 2017.”

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