2014 Will Be A Good Year For Residential Property

Private Property South Africa
Press

Repeated statements by the Rawson Property Group’s management to the effect that now is the right time to buy a home were backed up recently by the group’s Chairman, Bill Rawson, when he said that all the indicators now point to 2014 being a good year for residential property and those aware of the market trends should, he said, be buying right now.

“From my viewpoint,” says Rawson, “the Absa prediction of a 9% growth in house prices in the coming year is absolutely spot on.”

The factors working in favour of steady growth in house prices in Rawson’s view are:

  • The strong likelihood of inflation being contained below 6% and therefore interest rates remaining at low levels for most of 2014: “I think it is possible that, to give the right impression in the run-up to the election and show that they have South Africa’s economic growth at heart, the government will, in fact, reduce the interest rate by a further 0.25%. Although this would appear to be no more than a token gesture, it would win the approval of the influential trade unions and other powerful bodies and it would help people to reduce their debt and have slightly more spending money. All this augers well for the housing market.”

  • Increased infrastructural spending and the resultant job creation: “The funds allocated for internal development in South Africa have, so far, not been fully used. I see the State opening the taps further from now on and this will put extra cash into the consumers’ pockets as well improve the efficiency of our transport networks, roads and other infrastructural components.”

  • The growing shortage of homes and the resultant willingness to pay above previous price levels: “There is,” said Rawson, “one danger here and that is, as we are already seeing in a few instances, that the banks might find it difficult to ‘see value’ in some of the properties for sale. If this happens, home buyers may find 100% and 90% bonds harder to come by. In general, however, the demand for homes is increasing and this will have a positive effect on prices.”

  • The capital growth potential in housing in South Africa today: “With current and fixed deposit bank accounts as well as many other traditional money markets often giving very low returns, the logic of buying into bricks and mortar has improved greatly,” said Rawson. “For the uninitiated investor, a capital growth of 9% per annum is not to be overlooked, especially as this type of investment is relatively safe.”

Looking ahead, Rawson predicts that the strongest demand countrywide will be in the R250 000 to R500 000 bracket, followed by an almost equally strong demand in the R500 000 to R1 500 000 bracket. At the same time, he said, there is clear evidence that in the upper brackets demand and sales figures are also improving month-by-month.

Asked if the time is ripe for overseas buyers on their very favourable exchange rates to be buying in South Africa, Rawson replied: “We are very aware of this and of course we do try to cultivate the overseas market. The fact is, however, that whereas before many people had spare cash to invest in South Africa, today there has been a marked reduction in the First World’s private wealth and in their ability to afford second and third homes.”

Rawson added that one encouraging sign is that the number of bonds issued per month has now for the first time in three or four years topped 20 000 and, he said, with the banks’ new attitude to borrowers, this figure is likely to rise further, although, he pointed out, it is still a long way below the 40 000 bond mortgages made each month in the boom era of 2006/early 2007.

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