As 2015 gets underway, thoughts inevitably turn towards what the year will bring. Some of South Africa’s top industry experts recently shared their thoughts on how they think the property market will perform as 2015 unfolds.
Says Simon Bray, Private Property’s COO: “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.”
Roy Lazarus, MD of Park Village Auctions says property in gated communities, properties which can be converted into residential nodes and buy-to-let property around Sandton’s Gautrain station should enjoy strong demand throughout 2015 given their perceived benefits. He adds that at present the property auction market is quite healthy with many properties meeting and exceeding expectations. Whether or not this will remain the case as the year plays out remains to be seen as the effects of the recent credit downgrades and power outages have yet to really come into play he says.
Nicky Weimar, senior economist at Nedbank has been quoted as saying: “Over the past four years the residential property market has moved to firmer ground but the recovery has been painfully slow. On average property prices are growing at between 7% and 8% but on thin volumes. Over the past three months, demand for mortgages has improved and we have seen an increased willingness to extend mortgages among the major commercial banks.”
Adds Weimar: “While these developments are generally positive, household finances have deteriorated, hit by higher inflation and the long strike in the mining industry. Added to this, household debt burdens remain high and debt servicing costs are rising given the hike in interest rates. We therefore expect some moderation in the demand for, and prices of, residential property in 2015 as households tighten their belts in response to pressure on income and higher interest rates.”
Adrian Saville, CIO of Cannon Asset Management believes the property market will benefit from better economic growth, the lower oil price, moderate price inflation and a stable interest rate environment. That said he says there is a caveat given the proliferation of property paper being brought to the Johannesburg Stock Exchange. He advises investors to be mindful of the nature and quality of the property assets in which they invest as not all the assets are of equal attractiveness.
Meanwhile, FNB’s property strategist John Loos expects 2015 to be one of mildly stronger house price growth. That said, he believes it is unlikely that the property market can escape negative economic events indefinitely and that the housing market will slowly but surely move towards a broad downward correction in real prices towards levels more reflective of a weak economy.
Overall it seems that the outlook for 2015 is somewhat choppy. There are pockets of positivity but the overriding tone seems to be one of caution and that yet more belt-tightening is in the offing. Only time will tell.