“Trading conditions in the residential property market remains fairly challenging, particularly as the cost of living continues to escalate. Increased property rates, a volatile exchange rate, the advent of e-tolls and high levels of personal debt due largely to a surge in unsecured lending are also putting pressure on the market.”
The fact that consumer confidence is currently at an all-time low isn’t helping matters. According to the latest FNB/ Bureau for Economic Research’s consumer confidence index, consumers’ confidence in the outlook for the economy has dipped to its lowest level in 20 years. Most respondents believe the economy will deteriorate over the next 12 months.
Despite the less than rosy outlook, consumers are, according to the index, feeling slightly more optimistic about their own finances which “could partly be attributed to recent wage increases, petrol price cuts and some jobs created in the third quarter.” This sentiment should help anchor festive season spending to an extent but overall, it is expected that people will spend less than usual over the coming holidays.
Consumer confidence aside, Du Toit says the residential market appears to be entering a more positive cycle with most of the demand stemming from the emerging middle class seeking small to medium sized homes. Statistics released by BetterBond Home Loans indicate that the number of home loan applications received has increased by 5.06 percent in the 12 months to end - October compared with the previous 12 months. The total value of home loans granted through the originator has also increased significantly which demonstrates that the banks are more willing to grant loans.
Pipeline activity in relation to residential property is also reportedly robust with the real value of residential building plans passed up 20 percent of late. As has been the trend over the course of 2013, the construction of flats and townhouses continues to be favoured over free-standing dwellings.
In terms of the office property market, a lack of new business growth is keeping this sector in the doldrums to a large extent notes Du Toit. At present, only a few select, prime nodes are successfully attracting tenants, many of which are being driven by consolidation, occupation costs and re-branding concerns.
The office sector’s performance is currently at odds to the retail sector which has demonstrated a marked improvement of late. A number of shopping malls are currently being upgraded and a fair few ‘mega’ malls have broken ground. Demand for industrial space is also reportedly on the rise but sustainable improvement in the manufacturing sector is needed for this sector to truly bounce back in 2014 explains Du Toit.
In terms of PVA’s area of focus in 2014, Du Toit says the auction house will focus on the residential market and tenanted warehouses and factories in Johannesburg’s CBD as demand for such property is currently “booming”.