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Another rude awakening for homeowners

House prices in 2018 are expected not to keep up with inflation due to SA’s economic and political uncertainty.

It will be another year of heightened housing activity pressure in 2018, with property economists already forecasting below inflation growth for SA’s house prices.

The residential market has been downgraded as a whole for 2017, with a number of property economists expecting house prices to slow between to 3.2% and 3.5%. This forecast is markedly lower than 2016’s growth of 5% and 6% in 2015.

FNB property strategist John Loos and Absa Home Loans property analyst Jacques du Toit are, for now, expecting nominal house prices (before adjusting for inflation) to grow by 4.7% and 3.5% in 2018 respectively.

When factoring in an expected average inflation rate of 5.2% in 2018, house prices are expected to decline by up to 1.7%. House prices have fallen in real terms (after adjusting for inflation) since early 2016, but the rate of decline has been lower than the 16% decline seen in 2009.

Loos said the decline in house prices is not surprising given the worrying state of the economy, junk downgrades of SA’s credit ratings and low levels of consumer and business confidence. “Consumer confidence is in a dismal state and people are being conservative in their spending and borrowing patterns,” he said.

Housing activity typically mirrors the state of the economy, and with the economy expected to grow by a paltry 0.7% in 2017, 1.1% in 2018 and 1.5% in 2019 (according to the National Treasury), house price growth will likely falter in the coming years.

Absa’s Du Toit supported Loos’ view saying lower consumer confidence levels will likely result in prospective homeowners postponing new property transactions. “Existing homeowners will react in such a way that they will renovate their properties rather than upgrade to an expensive property. The property market will be affected in terms of lower transaction volumes, mortgage lending and demand,” said Du Toit.

One of the indicators of weak housing demand is the average time a property is on the market for sale, which has peaked to 15 weeks, similar levels last seen in 2013, figures from FNB indicate.

Declining house prices is not necessarily a bad thing, said Loos, as it allows first-time homebuyers to enter the housing market at cheaper prices. According to FNB, first-time homebuyers as a percentage of total buying reached a national average of 20.26% in the third quarter of 2017, which is lower compared with highs of 30% in 2005.

More encouraging is the fact that households are becoming less indebted if the household debt-to-disposable income ratio is anything to go by.

The ratio has been steadily declining from the highs of 87.8% in the first quarter of 2008 to 72.6% in the second quarter of 2017, helping households become less vulnerable to economic shocks and higher borrowing costs.

Pam Golding Property group CEO Andrew Golding said a positive outlook for the housing market also hinges on the outcome of the ANC elective conference in December, which is a key event for SA’s economic and political trajectory. “Given that many potential homebuyers are currently adopting a wait-and-see attitude, it seems fair to assume that if there is clarity on the political future and a positive outlook, there is likely to be a considerable pent-up demand which will emerge – resulting in a marked improvement in the local market,” said Golding.  

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The residential property market is talked up by the likes of “Dr Golding etc”, the real test will be when the expropriation of land comes into effect and then filters through to commercial and residential sectors.

And Mr Seeff having to look at his watch for a long time now waiting for his next sale…

Forget what the property prices are doing. Just try sell your home. in my case 10% loss over 2 years and i live in an upmarket suburb in Cape Town

You’re lucky it was only a 10% loss…

Sellers are now getting 20 to 30% less than asking prices in most suburbs ( a sinple check on property24 reports will confirm this).

And wait till the taps run dry and Triple Junk hits….

Are you not related to Robert in Sydney? You espouse a significant amount of doom and gloom, care to back any of it up? Please provide source to 20% to 30% off asking price.

Taps run dry? you need to be far more specific than that. Cape Town will do just fine, thank you.
Part of me almost wants to take a wager re water – winner selects a registered charity, you up for it?
Triple junk, yeah, have to agree with you, could get ugly in that regard – DEC17 will be a biggie.

That’s interesting. I live in the best part of Claremont, sold my house in 6 days flat for exactly what I wanted. 34% higher than I purchased it 4 years ago. I didn’t renovate but I did spend a fair amount on upgrades. It still comes out as a great investment.

Is that 34% before or after:

– Transfer fees
– Property rates (Cape Town property rates are the highest in SA by far)
– CGT (if applicable)
– Maintenance
– Upgrades
– Estate Agents commission
– Legal fees
– Insurance
– Opportunity costs (if applicable)
– ….etc

34% higher in 4 years. That’s a return of 7.59% per annum (if my maths is correct). Your idea of a great investment is very different to my idea of a great investment.

If this was your primary residence, then that’s a different story as ROI is usually not the main consideration in that case.

When I read the article heading, I thought “…gosh, what now?! Maybe a steep hike in Transfer Duty, or a whole new category of municipal rates to be implemented, or maybe a new law requiring a certain % of your Title Deed should be transferred to a PDI”.

None of that (..yet). Phew!

…so there’s NO “ruke awakening”.

I’m really not a fan of these articles because they’re so broad and aggregate. The amount of return you make on a property is so very dependant on so many factors. Aggregate means literally nothing at the end of the day unless you’re investing in property stocks. If you buy in the right area, look after your property, keep it current and market it well when you want to sell, you’ll do alright.

Non news and waste of space. Always the same “experts” punting property as investment and growth. Ignoring reality. Follow their advise at your own peril.

I can’t understand why homeowners get so upset when the housing market is slow or house prices decline by 30% over the short term. Kumba Iron Ore lost 80% of it’s value during 2008/09 and it is still a great investment today. The value of my farm regularly crashed by 50% over the past 40 years and today farmland is the best investment over a 50 year period.

Owning property, or any asset for that matter, is not for sissies.

Given the trauma the country is facing & will be in 2018 onwards – I would be surprised if house prices were NOT under pressure. Sydney house prices also seem to be under pressure- but this is because of pressure from govt & banks to get them down. Hout Bay is what I look at & yes close to 300 properties on market on prop24 – & some have been on there for ages. Agents will always talk up their book – so ignore them. As regards Investments it’s time to be taking yr profits off the table. it’s been an incredible 15 months – up 100%. So why not take a breather get yr money off-shore OR Naspers & “vasbyt” for next instalment of “adapt or dye!”

Another biased and uninformed opinion from Sydney’s finest oracle on all things African. He who can read micro economic property tealeaves in the Republic of Hout Bay from 11,005 kms away and extrapolate his visions to the macro economy of the Republic of South African.

On your comment: “Pressure from govt & banks to get them down…” – It is clear from the article below that the main drivers for the high risk in, and negative growth of Australian property comes from over optimistic investors and an economy that is starting to struggle. The level of amateur investors in Sydney is especially worrying.(Sydney % Change Month on Month data, Corelogic data 30/11/2017)

Excerpt from article: Australia is at growing risk of a home price crash because of the high number of mum and dad property investors, inflated prices, record household debt and an economy that appears to be losing momentum, a new report says. (published 1/12/2017)

But do not let the facts stand in the way of a good story robertinsydney

Please keep on posting your Aussie myths that we can debunk them with facts. Your assistance will go a long way in revealing the fact based truth to Moneyweb readers.

Beste groete uit Perth (Where I am renting by choice)

ah ha – the ubiquitous PFP – “Pack for Perth” japie. we had a look there when we first arrived over 30yrs ago. all we did was meet fellow ex japies. “didn’t come to ausland to meet ex japies” I said to the missus – so we stayed in Sydney. and from an investment point of view has been incredible. nothing in the world can come close to touching the property gains we have enjoyed – esp over the last 10 yrs – courtesy of the us federal treasurer and his/her low interest rates. however all things come to an end – which is why I am cashing in on my FANG and BAT stocks in the us this week. hout bay really interesting place. I suppose its the one place in w cape where the settlers meet Africa on common ground. and only need to check the “for sale” and “reduced to sell” etc to see what is happening there.

Hope you’ve taken agent’s commission,transfer duties and lawyers fees into account in your 34% calculation.These charges alone can easily add up to 14% and you’ve also spent money on upgrades.You would have been better off just putting the money in the bank!

What would’ve been useful here is some commentary around market segments. I don’t believe all segments are under the same amount of pressure. For instance, houses under R2M are in demand and therefore fetching good selling prices, however between there and R5M the sellers are discounting like mad, from what I’ve seen. Would be keen to see the real numbers though..

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