The economic factors that contributed to the decline in South Africa’s property market, have already seen some recovery in early 2017, says Rawson Property Group.<\/p>\n
On average, the property market across South Africa experienced a notable decline in growth over the course of 2016, with the year-on-year house price inflation rate dropping to a mere 1.6% in December 2016.<\/p>\n
This has been attributed mainly to slow overall economic growth and the effects of gentle but regular interest rate increases between 2014 and 2016.<\/p>\n
In addition to this, South African consumer confidence fell by 7 points to a dismal -10 over the festive season, resulting in some justifiable concern for the future of the property market this year.<\/p>\n
\u201cThere is no doubt that the market has entered into a period of slower growth after a long, positive trajectory,\u201d said Tony Clarke, MD of the Rawson Property Group. \u201cThat contrast alone can make the current property climate seem worse than it really is. Appearances aside, however, the economic factors that contributed to the decline have already seen some recovery in early 2017, and that could translate into stronger overall house price growth by the end of the year.\u201d<\/p>\n
According to the FNB Mortgage Barometer released on 8 February 2017, the South African Reserve Bank Leading Indicator has, indeed, started to edge higher. This, together with recent rains providing a measure of drought relief to much of the country, has experts predicting a boost in economic growth later this year \u2013 albeit a small one.<\/p>\n
\u201cA stronger economy will have a positive impact on house price growth,\u201d said Clarke, \u201cbut this does take some time to come into effect in any noticeable way. We\u2019re more likely to see results in the short term from the recently amended transfer duty threshold which will provide immediate relief to the entry-level housing market, triggering renewed growth on that end.\u201d<\/p>\n
The transfer duty threshold, previously set at R750,000, was raised to R900,000 as of 1 March 2017 (see the SARS transfer duty schedule here). This will make it more affordable for first-time buyers to get into the housing market, and has bond originators across the country preparing for an increase in first-time mortgage applications.<\/p>\n
\u201cThere is, unfortunately, minimal relief in transfer duty for those above the threshold,\u201d said Clarke, \u201cwhich means mid- to high-end property won\u2019t be getting the same boost in activity over 2017 that we\u2019re hoping for in the entry-level market. This, combined with a stronger rand \u2013 which decreases our appeal to international buyers \u2013 could see high-end property taking longer to regain its momentum than the rest of the market.\u201d<\/p>\n
Rawson noted that some markets haven\u2019t lost much momentum to begin with, and urban centres like the Western Cape, parts of Gauteng and Durban North can expect continued growth over 2017.<\/p>\n
\u201cMajor urban centres will always have demand for housing,\u201d said Clarke, \u201cand this helps even out the highs and lows of property cycles better than other areas. We\u2019re expecting urban sectional title developments, in particular, to see good growth over 2017 as the demand for safe, secure, and low maintenance housing continues to grow.\u201d<\/p>\n
Other positive factors for 2017 include a lower possibility of interest rate increases, assuming the rand can maintain its current strength and no major political unrest occurs.<\/p>\n
\u201cThis could make it easier for consumers to qualify for mortgages,\u201d said Clarke, \u201cwhich could help stimulate demand once again.\u201d<\/p>\n
While the combination of economic growth, a higher transfer duty threshold, ongoing demand in urban centres, and stable interest rates may not be quite enough to kick South Africa\u2019s property market into an upswing once more, it does give hope that 2017 may be a turning point for the better, the property group said.<\/p>\n
\u201cWe\u2019re unlikely to see a bumper year,\u201d said Clarke, \u201cbut signs definitely point towards a stronger end than beginning. We\u2019ll have to see how things pan out over the next few months, but I don\u2019t think 2017 will be as bleak as many would have us believe.\u201d<\/p>\n
<\/p>\n