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 favoring sellers to increasingly favoring buyers, he says. 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. 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”.
“That said, the market is still better off than in post-2007/8 thanks to the National Credit Act that has facilitated responsible lending and curbed the tide of rising consumer debt. We also do not have the flood of distressed properties to contend with”.
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 says 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.
“2016 has been characterized 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 says.
“We will see a notable shift to a more favorable buyers’ market in 2017. 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”.
The top end, R20m-plus sector of the market will be very discerning. Seeff also expresses 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”.
“The shift to the DA in the major metros, Johannesburg and Pretoria, but also Port Elizabeth along with the continued influx into the Cape, has shown that service delivery matters. Hopefully this shift will in time boost the top end markets of Sandton and Pretoria East beyond the R20m-R30m price barrier, as they should”.
The weaker economic outlook will no doubt boost demand for rental property, but at the same time, Seeff says that it will put pressure on rental rates and yields, especially at the top end.
While the market is stable for now, we need to expect the unexpected, he cautions. Brexit and the Trump election has shifted the theme for 2017 to the unexpected, so sellers and buyers need to be ready for the unpredictable.
“On the radar 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”, he adds.
“That said, even with all the problems, South Africa is still a better place to live and buy property in compared to many other countries. We have excellent infrastructure and top class private schools and universities, a real attraction for wealthy African buyers”.
“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”.