This is according to Shaun Rademeyer, CEO of Betterlife, who points out a number of encouraging factors at variance with other current industry perspective.
“Despite a number of bleak predictions for both the economy and the residential property market for the year ahead, savvy investors can look to capitalise on the very real opportunities that current market conditions present,” says Rademeyer. It is often in a challenging business environment, or when stock markets are under threat, that residential property demand flourishes.
Both in buoyant times and through recessions, property investment has proven a sound decision for home buyers and investors he comments. “In fact, as a catalyst for wealth creation, it’s still hard to beat!” The key, as with almost any investment, is still to exercise patience and a long-term view.
The fact remains that the country’s housing shortage will continue into 2016, with demand, particularly in the larger metropolitan areas, still far outstripping supply. “Ultimately, there are still more buyers in the market than sellers and what 2016 may well introduce is a shift from the strong sellers market we’ve experienced in past years to a more balanced market. Whilst the pace of growth is likely to slow, and remain in single digit territory, the fact is it will still grow.
“In 2015 it was still a fairly aggressive market, where decisions needed to be made quickly, but with the market tipped to ‘take a breather’ in 2016 this should put less pressure on purchase decision-making and give buyers increased confidence in the property process.”
Affordability will be a key theme for the year. The impact of a weakened economy, along with rising interest rate will drive a search for affordability amongst an increasing number of buyers and, together with a compelling desire to contain household costs, municipal rates, utilities and maintenance, the trend towards such properties will continue to fuel price appreciation and stock supply. This should keep prices on a par with, or slightly above, inflation. It should also play into the lower priced area of the market.
Consumers should buy homes well within their means so they would be able to absorb more interest rate hikes should they materialise. But, for the most part, it appears home buyers factor in that interest rates will increase in 2016 and, as such, the impact of these increases may have a marginal effect on buying trends.
“I believe the market will remain stable for bond approvals in 2016, however consumers will need to understand that the affordability of the home loan in 2016 will be different to 2015. A downgrade by rating agencies would make capital funding for the banks more expensive and impact the affordability guidelines for consumers,” he says.
“However, consumers that have kept their debt to income ratios low and have been working smartly with their money could benefit from negotiating a good price on a home as we move from a sellers’ market to a buyers’ market - as Warren Buffet always says, 'buy when people are selling and sell when people are buying!'
"Ultimately, we anticipate that more buyers will purchase within their affordability constraints and at lower levels, and that banks will drive buyers to put down larger deposits. Banks will be watching the consumer affordability position very carefully and will tailor their lending approaches, both in terms of the home buyer and the property itself, to contain risk," comments Rademeyer.
With buyers continuing to prioritise security in South Africa, industry experts collectively agree that the demand for secure estate living is a trend that’s not going away. The growing need for smaller residential and sectional title units is real - and these homes are also likely to continue to see better than average price growth he says.
Growing urbanisation and densification trends will continue to gain momentum and pockets of strength in the residential property market will remain in the metro areas as a steady influx of people move towards the convenience offered by a ‘live, work, play’ lifestyle.
