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Post-elections sentiment set to improve, but prices to remain under pressure

Category Forecast

While there is an anticipation of a post-election rebound in the economy and property market as certainty and stability return, it will take time before we can expect a resurgence in price growth.

Indications are that business and consumer confidence remain weak, and while the economy is expected to improve to 1,3% growth this year (up from 0,8% in 2018), it is well short of what is required for a real uptick in the economy and property market.

That said, sentiment is expected to improve on the back of what is seen as a successful election and a continued focus on reform by President Ramaphosa. We therefore expect that buyers who have been sitting on the fence, waiting to see how the elections pan out, may now feel more confident about finally taking the decision to put pen to paper, but they are likely to still look for a good deal, not necessarily fair price that sellers might be expecting.

Overall, the first few months of this year, has seen a weakening in the property market. Both the ABSA Homeowner Sentiment Index (HSI) and FNB Property Barometer point out that after a promising fourth quarter of 2018, the market has again lost momentum this year with house price growth remaining weak while there is now an oversupply of stock in the market.

FNB notes that the housing market has been hit by the impact of the weak economic climate and declining wages. The result has been weak demand and a rise in stock levels while the national House Price Index declined to 3.4% year-on-year in April, compared to a previously forecasted 3.8% growth. It further notes that the Western Cape property market has weakened with price growth of just 4.6% y/y in the first quarter (down from 4.8% in the fourth quarter of 2018).

While we expect improvement in demand, sellers need to note that property analysts expect the market remain flat this year, and the hard reality is that we will highly likely not see an easing off of the downward pressure on selling prices for the rest of this year. There is a market, but sellers need to be flexible to fit with the market.

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Author: Gina Meintjes

Submitted 22 May 19 / Views 560