Property leaders positive despite GDP shock
The shock announcement that the country’s GDP declined by 2.2% in the first quarter of 2018 is disappointing, but property leaders expect the residential market to remain resilient. South Africans still need a roof over their heads after all, it must just come at a realistic price.
“The news that the first quarter GDP shrunk by 2.2%, the worst in 9 years is indeed very disappointing given the improved confidence and positive mood that the appointment of President Cyril Ramaphosa brought about early in the year,” says Stuart Manning, CEO for the Seeff Property Group.
He explains this year’s initial excitement around Ramaphosa’s appointment has been tempered by the land expropriation issue and policy uncertainty. The VAT and other costs hikes are also having an effect and people are concerned about property rights and how the country’s economy and sovereign debt is being managed.
From a property market perspective, the ongoing weak economic climate means that anyone who does not need or really want to buy right now, is sitting on the fence.
“This is worrisome as the property sector is a notable contributor to government revenue (in the form of transfer duty for example) and economic activity associated with property transactions. Nonetheless, we continue to feel positive that the economy will take a positive shift. Many economists are also saying that we should wait until the second quarter results,” says Manning.
However, Dr Andrew Golding, chief executive of the Pam Golding Property Group, says despite South Africa’s low economic growth in the first quarter, the country’s housing market remains resilient with improving growth prospects.
“The common denominator in today’s market is undoubtedly realistic pricing, as buyers generally are price-aware, seeking sound value for money. Over-priced stock will sit on the market.”
They are seeing an increasing demand for sectional title properties – a trend Golding says they expect to continue for both lifestyle and economic reasons, particularly given people’s desire to reduce transport costs and workplace commuter time.
“According to FNBs House Price Index, May (2018) was the third consecutive month of house price acceleration, which FNB household and property sector strategist, John Loos, says is an early sign that significantly improved sentiment in South Africa early in 2018 is beginning to impact positively on the housing market and house price growth,” he says.
Dr Golding goes on to say: “While factors which include the 1% hike in VAT and increased fuel tariffs will impact business and consumer confidence and market sentiment in general, it is expected that South Africa’s residential property market will continue to maintain its resilience, reflecting an ongoing healthy appetite for property investment – particularly in major metros and key hubs – areas where developers continue to bring new products to market, and where increased densification will further drive demand for residential accommodation.”
Berry Everitt, CEO of the Chas Everitt International property group, says all indications are that sellers will now have to adjust their asking prices downwards – or wait longer for their homes to sell.
The other side of this coin, he notes, is that some excellent opportunities for home buyers and investors can be expected to reveal themselves in the next few months – especially if they have good credit records and cash available for deposits.
“The banks are very keen to lend to homebuyers at the moment, and we would say that those who have worked hard to pay off debts and prepared themselves to buy should not hesitate, as the downturn is not expected to last long,” concluded Everitt.
Tony Clarke, managing director of the Rawson Property Group, said there is no reason to panic about the reported decline in the GDP as most economists remain upbeat and this report is only a quarter on quarter measurement and this figure will be revised to reflect seasonal adjustments.
Furthermore, any long-term measured decline in the GDP will only marginally impact the property market as South Africa still has a huge demand for living accommodation. “People need a roof over their heads!” Clarke concluded.
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