House price appreciation seems to be holding its ground, amidst slow economic growth.
It is no secret that the South African economy is performing poorly and has been for some time now. According to Stats SA, real gross domestic product decreased by 0,6% in the third quarter of 2019, following an increase of 3,2% in the second quarter of 2019.
In the MPC statement provided on 16 January 2020, Governor Lesetja Kganyago explained that the forecast of GDP growth for 2019 is revised lower to 0.4% (from 0.5%). “The forecasts for 2020 and 2021 have also decreased to 1.2% (from 1.4%) and 1.6% (from 1.7%), respectively, due to lower growth than previously expected in the third and fourth quarters,” he elaborated.
Speaking to how the property market has performed against this backdrop, Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa explains that, depending on which report you read, national house price growth is somewhere between 3-4%. When adjusted to inflation, which is currently up to 4.0% in December from November’s 3.6%, house price growth has been flat.
“The housing market is directly linked to how the economy performs. Yet, despite the challenging economic climate, the housing market is proving resilient, managing to break even rather than reflect losses. In certain areas, house price growth beats inflation. The Western Cape, for example, reflected 4.5% growth in nominal house prices according to Lightstone Property report released in November last year,” Goslett explains.
Goslett also reminds South Africans that property is intended to be a medium- to long-term investment. He, therefore, recommends that they not allow their confidence in the local property market to be shaken by these tough economic times.
“Having been in real estate for over fifteen years, I have seen the market recover from worse situations. I also believe that better times are ahead. I therefore encourage investors not to lose hope in the local economy, but to show faith by investing in the local property market before prices begin their inevitable upward climb in the medium- to long-term,” Goslett concludes.