Factors weighing the current property market
Category News
Welcome to 2019, a year of some expectation. We kick off with some good news in the form of improved economic growth, a further petrol price cut, improved tourism figures for the Cape and the decision to keep the interest rate on hold for now.
While improving, overall confidence remains a drawback for the economy and property market, and the next few months is likely to remain subdued, both on the economic and property front. The May Elections are likely to bring a turning point, but for now, the below factors will continue to weigh on the market:
Rising costs, cautious buyers - consumers will have to absorb a number of cost rises including utility costs hikes in the early part of the year which will further dampen their ability to spend in the economy and on property. This, together with remaining policy concerns around land security, will mean that buyers will remain cautious and highly selective.
Subdued price growth - recent bank data shows property fundamentals continue declining with average price growth expected to remain in the lower 4%-6% range along with slow demand and higher stock levels. Buyers will remain focused on value as represented by a combination of price, size, position and condition of the property.
More stock, slower sales - stock levels will continue to rise and buyers will have more to choose from. Properties will take longer to sell, around three-and-a-half months on average to about six months and longer at the top end of the market. That said, the flat price growth will mean that buyers can find good value and should not wait too long.
Favourable financing climate - the banks are still granting bonds and conditions remain favourable as the major retail banks look to grow their mortgage books in a low volume market. Approval rates, rate concessions to buyers and loan-to-value criteria (deposit requirements from the banks) will likely remain favourable as the banks compete for business.
Rental market will remain subdued - although demand for rentals will be higher, the oversupply of stock on the market will keep rental and escalation rates subdued, especially at the higher price ranges. Landlords will need to be flexible and negotiable to win out the day to secure a good tenant.
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Seeff Southern Suburbs | +27 21 794 5252 | southernsuburbs@seeff.com
Author: Seeff Southern Suburbs
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