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This is what you can expect from the property market in South Africa this year

1/2/2020

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Following another year of tepid economic growth, and with the latest round of load shedding further dampening the economy and expected to result in a Moody’s downgrade, where does that leave South Africa’s residential property market?

With household finances under pressure for the foreseeable future, the focus is likely to remain on affordability, value-for-money and cost saving – for example transport and utilities – for the bulk of the market, said Dr Andrew Golding, chief executive of the Pam Golding Property group.

Dr Golding outlines the group’s vision for 2020:
While there will still be pockets of activity and price growth, the performance of the national housing market is likely to remain subdued.

Yet despite the knock-on effect of the drastic load shedding measures, there remain a number of positive factors underpinning the housing market, namely the demographic dividend of a young population – including first-time buyers – fuelling property purchases and rentals, relatively low interest rates, affordability returning as prices correct, and a strong appetite for lending from increasingly competitive financial institutions – with ooba’s loan to value rising to 88.4% in October which is the highest level since the data series began in 2007.

However, this will not translate into a meaningful recovery until economic growth and sentiment strengthens, and there is an improvement in incomes and employment opportunities.

Tourism boost
One of the factors we believe could prove a boost for South Africa’s economy and ultimately even provide positives for the property market is tourism.

Our beautiful country offers breathtakingly scenic landscapes and spectacular coastlines, vibrant cities and rural places of interest.

With a reduced value of the rand, we could attract a significant increase in the number of visitors which would help build entrepreneurial attractions, accommodation and other opportunities within the tourism industry.

In KwaZulu-Natal, the introduction of direct flights between London and Durban by British Airways a year go has resulted in an 11% increase in international passenger numbers in the year to September 2019 compared to the same period last year, bolstering King Shaka International Airport’s status as South Africa’s fastest growing international air gateway.

Introduced in December 2019, and with a flight time of just 14.5 hours, the new direct flight between New York in the US and Cape Town augurs well for tourism and foreign direct investment – as the US has a huge luxury travel market – and according to Wesgro, has already resulted in an increase in forward bookings by US tourists to Cape Town for the summer season.

Coupled with this, the Cape Town Rugby Sevens in the Mother City is to be eclipsed by the World Rugby HSBC Sevens Series in 2022, which is also hosted at the Cape Town Stadium, while England supporters will flock to our country’s shores during the cricket test series versus the Proteas.
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​​Further to this the 2021 British and Irish Lions tour will attract additional visitors to South Africa.

Tourism is recovering after the drought and aided by an easing of visa restrictions and piloting of an electronic visa application system coupled with increasing numbers of direct flights, will bring more money, translating into economic growth and jobs, and more prospective buyers to the country.

It is hoped that economic growth will be slightly stronger this year, despite risks to the downside.

Supply is slowing in response to weak demand, with fewer new houses and sellers keeping or removing homes from the market.

Demand seems to be slightly stronger, especially in the price band below R2 million, so the market could edge back into equilibrium and then we will start to see signs of an improvement in the market in the new year.

Young buyers
Young buyers remain a key positive for South Africa’s housing market, ensuring a steady supply of new homeowners as we have a ‘youth bulge’, with many eager to gain a foothold on the property ladder.

Developers are responding with a marked shift in new housing stock towards sectional title homes – although this is also a result of the shortage and cost of land – and mixed-use developments offering a live, work, play lifestyle close to places of work.

The recent introduction of micro-units in Cape Town CBD and surrounds is also a response to strong demand from first-time buyers who want a lock-up-and-go lifestyle and to enjoy downtown living.

This has been a key driver behind the shift in housing in South Africa from freehold suburban homes to mixed-use precincts and developments, and the rise of shared, third spaces.

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