While the residential property market in South Africa absorbed and adjusted to the January (2014) interest rate hike relatively seamlessly, there were concerns that inflationary pressures and the stance expressed at the previous meeting of the Monetary Police Committee would see the repo rate recommence on an upward cycle – as has transpired, says Dr Andrew Golding, CE of the Pam Golding Property group.
“Although not unexpected, the increase in the repo rate by 25 basis points following this week’s MPC meeting (17 July 2014), is unfortunate news for homeowners, as well as the growing contingent of aspirant, first-time buyers, and will ultimately be most felt by those who are already feeling the pressure of rising utilities costs and erosion in real household disposable income.
“This year the residential property market has performed strongly in all sectors. The Pam Golding Property group continues to achieve increasing sales volumes (units) in regions and areas around the country, and notes increased consumer and investor confidence across all price bands – including the luxury homes market upwards of R10 million and beyond. The top end of the market has led the way but we have also seen a resurgence of a young generation of purchasers – mainly singles and young couples or families, acquiring their first homes. Encouragingly too there are also signs of significant progress being made in regard to the backlog of distressed sellers which resulted from the recession.
Developments market gains momentum
“In a similar positive vein the market for new residential developments continues to gain traction as developers and home purchasers alike demonstrate a strong appetite for newly built property, which offers all the benefits of secure and convenient, uncomplicated, lock-up-and-go living in well-positioned, central locations. These and other investor-type products in gated estates afford not only the potential for increasing capital growth and sound rental returns due to strong demand, they offer considerable lifestyle appeal for those who prefer to rent.
Stock shortages increasingly evident
“For the calendar year to date the market has generally been characterised by ongoing positive sentiment, increasing activity levels, brisk sales and a marked shortage of stock in many areas around the country. During the past quarter these stock shortages have become increasingly prevalent and broad spread around the country, with well-priced homes in popular areas seeing several buyers competing for the same property and selling rapidly. At present activity levels in high demand areas are limited only by access to stock.”
Dr Golding says other factors contributing to the improving residential market outlook include greater affordability, particularly at the lower levels, and marginally easier credit criteria imposed by the mortgage lending banks. “It is hoped that the interest rate remains relatively stable in the months ahead, particularly as the economy requires growth stimulus. However, we are optimistic that the residential property market will enjoy sustained activity levels in the near future,” he adds.