2019 can only be described as a very difficult and unpredictable year in the residential property market, resulting mainly from the sluggish economy in South Africa. The job losses in the economy and poor investor sentiment added to the woes in the property sector. Eskom’s troubles and the resumption of loadshedding also painted a darker picture.
The light at the end of the tunnel was at the lower end of the housing market (under R2 Million), which performed very well. Competitively priced homes offering good value in this bracket sold quickly. Buyers here were rewarded by banks that suddenly had an appetite to grant mortgage bonds and a low interest rate cycle.
Continued Emigration from South Africa and Semigration (a local move within South Africa, usually from Gauteng to the coast, esp Cape Town) has put a significant volume of upper-end properties in the R5 Million+ range on the market with very few of these actually being sold. International buyers have all but disappeared.
The Residential Rental market is Gauteng was characterised by an over-supply of rental stock and fewer good tenants available. This resulted in the following factors:
- Longer vacancy periods for rental properties
- More choice for tenants
- Significant increase in cancelled rental deals, esp when landlords were tardy in replying to rental applications. Tenants simply moved on to the next property.
- Negotiation by tenants and a general decrease in the monthly rentals being asked by landlords.
- Increase in bad debt and rental defaults.
- Below inflation rental increases
According to TPN the National Demand Rating has decreased by almost 28% since 2016 and the Supply Rating has increased by 33% over the same period. In Gauteng the declining market strength has been driven by a 22% decrease in the Demand Rating and an 8% increase in the Supply Rating over the last 3 years. Surprisingly, some Advice for Landlords seem oblivious to this and are doggedly holding onto expectations of 10% per annum rental increases.
So what does 2020 hold in store for us?
The World Bank has cut SA’s growth forecast to 0.9% and we have started the year with more loadshedding. Business confidence is fragile. As a result most of the industry leaders in the Real Estate sector agree that another tough year is in store in the property market. So it seems that tenants will remain under financial pressure and the over-supply of rental property will slowly start to normalise, but this will in all likelihood still take quite a while.
FNB have forecast an average annual house price growth of 3.7% for 2020, vs an inflation forecast of 4.3%. We believe that the growth in the lower-end market (under R2 Million) will be above 10%, so that at least remains attractive. This means that 2020 will present great buying and renting opportunities to those looking. There will always be a demand for realistically priced property for sale or to rent.
Here also are some of the trends that will continue or gain more traction in 2020:
- Focus on security features available in homes
- Going Green and Getting off the Grid – loadshedding and a focus on energy and water saving features.
- Increased demand for smaller (Sectional Title) more affordable and manageable homes with reduced monthly costs.
- More young buyers with their specific needs.
- Sharing of homes for rent.
- Continued Emigration and Semigration.
- More use of technology in the industry esp. by Estate Agents to streamline the buying and renting processes for buyers and tenants.
- At the end of the day the property industry always goes in cycles and even this tough cycle presents opportunities. They question is, are you ready to take it?