Before we look at what lies ahead, to gain a clearer perspective it is pertinent to review the past year and key macroeconomic and political factors, which have impacted both South Africa’s economic prospects and the performance of the residential property market.
After several consecutive years of subdued economic growth and, more recently, the hike in petrol prices, general consumer inflation and the tax increase, household finances – already weakened after several ‘lean’ years – have come under considerable pressure this year.
If we look at the national housing market overall, it has had to contend with economic and political headwinds. The relative out performance in the Western Cape was, to an extent, achieved at the expense of the rest of the national housing market – with semigrants selling their homes in Gauteng and relocating to the Cape, for example.
It is important to note that the housing market is undergoing a period of change in which the old ‘driver’ (Western Cape), while still turning in an impressive performance, is being replaced by new ‘drivers’ in Gauteng and KZN. Also, the areas of growth in the market now are not necessarily the well-established high-end suburbs but currently the more affordable areas which are not out of the reach of South Africa’ numerous less affluent buyers. And there are areas which are still seeing increased activity, for example as towns formerly considered holiday towns which are now attracting permanent residents – such as those along the Whale Coast and Garden Route. The current market slowdown is thus primarily one of the top-end and the Western Cape understandably cooling after running ahead of economic realities. It is now the turn of the more affordable, less popular towns and suburbs to recover.