State of the Residential Market - Update from Jawitz Properties CEO, Herschel Jawitz.
The current residential market continues to reflect the state of the nation and the economy both in terms of price growth and level of consumer and business confidence.
The market has definitely shifted to a buyers market over the last 12 months. There are generally fewer buyers, more sellers and less sold boards than we experienced this time last year. Buyers are looking for value in the current market. If they can buy the same property for less in a less expensive suburb, they will, while many sellers are reluctant to accept the new market. As a result, homes are taking longer to sell. According to the latest FNB Residential Activity report, properties are taking on average 14 weeks to sell, up from an average of 11 weeks in the previous quarter.
In most parts of the country, property price growth is barely keeping up with inflation so in real terms there is very little or no growth. With inflation hovering at about 6% and property price growth on a national basis more in less the same, 2016 will be a ‘breakeven’ year for real price growth.
Cape Town seems to be the one city where demand continues to outstrip supply. In addition to desirable factors like sea views and a general scarcity of supply, there is a different level of buyer confidence in the Western Cape.
There is a strong sense that there is less crime, less corruption, better infrastructure and a well-run province that makes the Cape so desirable as a place to live. This comes at a price however with the replacement cost of a property in Cape Town as compared to Johannesburg is at least 30-40% more. At the luxury end of the market, an increasing part of this demand is coming from executive semi-gration as families relocate from Johannesburg to Cape Town while maintaining their business interest in the Highveld. From a property price growth point of view, the Western Cape and specifically Cape Town will be the star performer with property price growth expected to be at or close to double digits in 2016.
Jawitz says that despite low consumer confidence, there are sales taking place. We are at least for the moment in a stable interest rate environment which impacts positively on affordability and sentiment and banks have not really tightened their lending criteria. The common denominator in this market is price. In a buyers market, sellers are competing with other sellers for fewer buyers. There are quality buyers and banks are lending. How long a property stays on the market and at what final selling price depends on how quickly the seller will respond to the market.