Residential property market update - easing lending conditions support buyer's market
Category Market Update
The latest residential property market data points to some improvement in the market, but conditions remain weighted in favour of buyers, especially above the R3.5 million price mark. Easing of lending conditions further supports the buyer's market conditions.
According to the latest FNB Property Barometer, the best performing price band in terms on increased transaction volumes is R700 000-R1.8m followed by a moderate improvement in the range to R3.5m. Above that, the market remains selective. The mid- to lower price sectors have been greatly aided by the improved lending climate with FNB reporting that mortgage advances outpaced house price growth for the first time since mid-2011. The LTV (loan to value) also reached 90.6% in 2Q19, up from 88% in 2Q17 making it easier for buyers to obtain mortgage finance.
House prices edged up moderately to 3.8% y/y in September, from 3.7% in August. This, however, remains below the inflation rate which stands at 4.3% as at August. Cape Town house price growth has finally caught up with the economic decline, recording growth of a paltry 0.5% for the first half of the year compared to 5.2% for Durban, 4.3% for the Johannesburg East Rand, 2.6% for Johannesburg and 1.5% for Pretoria.
The time that it takes to sell a property in Cape Town stands at around 13.5 weeks, still somewhat longer than the healthy market average of 12 weeks. Although slower than Pretoria (11.4 weeks) and Port Elizabeth (13.1 weeks), it is still faster compared to Johannesburg (14.4 weeks) and Durban 16.1 weeks).
Although the bank reports an improvement in the demand-supply gap over the past few months with a slow-down in listings, it nonetheless reports that supply continues at a steady pace, boosted by new stock and emigration-related sales.
The take-out for the market is that demand remains muted at the upper price points. The continued weak demand combined with the drastic slow-down in price growth in the Cape means that sellers will need to continue keeping their price expectations conservative, especially given that the limited pool of buyers still have more property listings to choose from.
Following an initial expectation of GDP growth this year of around 1.2%, The International Monetary Fund (IMF) recently lowered South Africa's economic growth forecast to 0.5% amidst a global growth slow-down. The recent resumption of load shedding will no doubt put further pressure on the economy.
Despite the economic pressure, the property market is holding up well and is showing signs of improvement. We are now entering the traditionally busier period for the property market ahead of the new academic year, but as always, working with a credible team of estate agents is advised to ensure that you make the right decisions about your property.
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Author: Gina Meintjes
