What are your property predictions for the first 6 months?
One thing appears to be true of the post-boom property market in South Africa: consistency. Nothing particularly volatile has happened in the market since the credit regulations of 2008. We see slow but steady recovery in transaction volumes and this trend should continue into the first half of next year. One thing that is encouraging is the significant growth in the new development sector. This increase in supply should stimulate fresh growth for 2015.
Where do you see the biggest area of improvement?
We still see significant room for improvement in the property transaction process. The average property still sits on the market for six to eight months before being sold and, in that time, goes through a frustrating cycle which we believe could be improved. All sorts of opportunities exist to speed this up including, price education with sellers, and more effective marketing and presentation of properties for sale. We have some innovations in this space that we hope will speed up the process and with it bring real improvement to the overall market in 2015.
Which type of residential housing will see the most growth?
Gated communities will continue to lead the pack in the luxury housing market. You only have to take a drive to the growth nodes of Johannesburg north and Centurion to see the vast developments coming out of the ground. This significant increase in new property supply is probably the most interesting element of the South African property market right now. Gated communities, apartment blocks and estates are being looked at as more attractive than traditional upmarket suburbs. Perceived benefits like security, shared costs and lifestyle facilities are driving buyers away from traditional suburbs to the detriment of those established markets.
What will be the most influential factors in the sector?
A healthy supply of credit remains the biggest factor driving market growth. If banks continue to grow their lending book as we have seen them do this year, then 2015 should be a good year for the property market. However as the major banks are multinational businesses they continue to be at risk from the global recession and this, as well their recent credit rating downgrade by Moody’s, may put pressure on their appetite to lend.
Do you see the interest rating staying the same, dropping or going up?
We don’t believe the interest rate will go up significantly in the next 12 months but we certainly have entered an upward cycle. The recent rise of .25 basis points indicates the Reserve Bank’s intention to conservatively increase rates. This is unlikely to dent consumer confidence in property and demand should continue to improve. How a rising interest rate will affect the credit environment is another story entirely. Lending institutions may be cautious of rate increases in the midst of other inflationary pressures like rising food, fuel and utility costs, as this all impedes the ability of their clients to repay their loans.