While we wait for the conclusion of the May Elections and the economy to take the positive turn that we are all anticipating, it would be remiss not to continue cautioning that economic and property market recovery will take time.
The renewed Eskom crisis has again reminded that the economic and governance challenges are deeper than anticipated when President Ramaphosa took the reins last year. Although the GDP growth outlook for the year is positive at around 1,3%, the renewed energy crisis and rising costs, most notably that of fuel and the effective 13.82% Nersa approved electricity hike will no doubt impact growth in the first quarter.
This translates to a somewhat muted property market which, while active below R1,5 million (R3 million in the upper income areas), continues to put pressure on sellers and asking prices. The FNB Price Index shows that price growth has declined to 3.7%, down from 4% in January and 3.9% for 2018. Along with that, a deteriorating demand-supply balance point to an increasingly favourable market for buyers.
The favourable conditions for buyers are further supported by the positive mortgage lending landscape and flat interest rate. For those buyers who are still undecided or sitting on the fence, now may well be a good time to buy, provided they are able to find good value.
What are the implications for the market? All important, is a focus on asking prices, especially at the higher price levels where we see a discretionary market in operation. In a climate of fewer buyers and notably more properties to choose from, serious sellers need to focus on listing with credible agents who will give you the best advice rather than waste your time with high price promises.
While the rental market is seeing slightly better growth at around 4.14% for the last quarter of 2018 according to the PayProp Rental Index, this is down from 5.39% in 2017. The index shows that the consumer rent-to-income ratio is under pressure. In such a climate looking after good tenants should top looking for quick wins with high rentals.
We remain of the view that the property market will remain fairly flat, trading largely sideways for the first half of the year, and current market and economic indicators continue to support that view. There is a market for serious sellers, but you need to adjust to your local market trends as we are seeing an increasing number of sellers having to drop their asking prices to conclude a deal.
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