A number of factors continue to impact the South African property market in 2016, following a tough year both economically and politically. Rising interest rates, a weakened rand and the drought’s dreaded affect on the cost of local food supply have put the national economy under significant pressure.
The SA Reserve Bank’s policy to contain inflation and keep the CPI within the 6% target guarantees interest rate hikes throughout the year; the prime lending rate now standing at 10.25% after the SARB's Monetary Policy Committee meeting on Thursday. This increased cost to credit places South African consumers under mounting pressure; especially homeowners with high home loan repayments and first-time buyers looking to enter the market.
House prices in real terms are expected to take a knock due to a fall in the number of property sales and transfers – this is a result of reduced mortgage affordability and stricter lending criteria.
It puts terrible pressure on the buying-selling market; as sellers are forced to make desperate sales and low-to-middle-market prospective buyers are removed from the market completely.
Despite this, the housing market continues to witness positive buying activity, particularly at the lower end of the market. There are a number of reasons for this, namely; household financial pressures and stricter lending criteria by mortgage lenders will force aspirant home buyers to adjust their expectations and buy in the lower range. This translates to a higher demand for properties under R1.5 mil, and in particular - sectional title properties. With crime statistics as high as they are, more South Africans are seeking the safety and convenience of security and lifestyle estates. Major metropolitan areas continue to establish sectional title developments offering affordable, low-maintenance, security-conscious living.
Sectional title homes still hold capital growth appeal for investors and will continue to do so in the coming year.
Although the forecast for the property market in 2016 is subdued, buyers and sellers alike should focus on living within their means, saving and lowering debt in preparation for the coming year and its challenges. On a positive note, the forthcoming difficulties will ensure South Africans are more conscious of preserving and establishing a healthy household financial position.