Weaker SA property market expected for 2017
Slower sales, stalling house prices, rising consumer debt and affordability challenges will dominate the housing market in 2017, but Samuel Seeff, chairman of the Seeff Property Group, is keeping his outlook for the market into the early part of next year as stable.
This year has seen the market shift notably from favouring sellers to increasingly favouring buyers, he said. Price growth has dropped notably, save for the Cape that has remained the star performer, but even here, the market and prices are now slowing.
Heading to 2017, we are looking at a very different market compared to the start of 2016, Seeff said. “We now look to 2017 as a challenging year with an underlying current of fiscal consolidation, rising taxes and costs, higher inflation and growing pressure on consumers, home owners and buyers.”
Some positive news include the recent decision to keep the interest rate flat a bit longer and, although Fitch has adjusted the country’s sovereign credit ratings outlook to negative, Moody’s and S&P have kept it unchanged for now.
The market is still fairly balanced overall and Seeff said that most ordinary consumers and buyers have had some time to adjust to the economic outlook and rising costs and have factored this into their planning and home buying decisions.
Seeff noted that 2016 has been characterised by a notable slow-down. Traded volumes in the metros are down to the pre-2012 levels, with Pretoria fairing slightly better and the Cape still ahead, boosted by an influx of buyers from other areas and ongoing demand from foreign buyers.
The smaller towns are also slower and the mining belt towns of the Northern provinces are especially feeling the pinch.
“We have now come to the end of a three-year positive growth phase. While Seeff and other agencies have still increased their turnover this year, most of it has come from organic growth; expansion into more markets and more agents as small operators migrate to the bigger brands,” he said.
According to the property group, 2017 will see a notable shift to a more favourable buyers’ market. “Stock levels will rise further, properties will take longer to sell and the focus will be on market related asking prices. Buyers are now more informed about the market and will be keenly aware of the shift,” Seeff said.
The top end, R20 million-plus sector of the market will be very discerning. Seeff also expressed concern that the continued economic and political instability will likely motivate less high end buying here as wealthy buyers will want to put one foot offshore and invest more into property in the ‘golden visa’ destinations.
“Without business and investor confidence, the economy cannot grow and we will continue seeing job losses. That means a weaker outlook for first time buyers especially with even fewer able to get out of informal housing,” Seeff said.
The weaker economic outlook will no doubt boost demand for rental property, but at the same time, Seeff said that it will put pressure on rental rates and yields, especially at the top end.
On the radar in 2017 remains possible further interest rate hikes and the credit downgrade which will have significant longer term consequences for the property market – further interest rate hikes, flat demand, weak house price growth and a slow-down in new developments, the property group said.
That said, Seeff pointed out that ordinary South Africans will continue buying and selling and the market will still be active. Foreign buyers too may find more value in our property. South Africa is still cheaper in many respects and, we are a fabulous holiday, retirement and second home destination.
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