The renewed appetite on the part of the banks to increase their mortgage books means that qualified buyers are finding it easier to obtain home loans, something that has driven strong first-time buying.
This is according to Seeff chairman, Samuel Seeff, who says this turnaround is something to cheer about. He says the market is on solid ground, with a good balance between demand and supply, tilting somewhat up on the demand side in favour of sellers, on the back of almost countrywide stock shortages. Heading towards 2015, sellers can expect the buoyancy to continue, with buyers aplenty and good prices, despite the subdued economic outlook. According to Seeff, while somewhat contrary to expectations, it is not wholly unexpected. It underscores the historic resilience of the market, and it was always just a matter of time before buyers would be back, as they have seen since early last year, and especially into this year. Households have been reducing their debts, saving for deposits and benefiting from inflation beating salary increases. At the same time, he says the middle-class has grown in numbers and wealth. According to FNB’s latest Property Barometer, financial stress related selling has improved, and the middle segment of the market is upgrading. All of this, Seeff says, has been a favourable boost for the market. The renewed appetite on the part of the banks to increase their mortgage books means that qualified buyers are finding it easier to obtain home loans, something that has driven strong first-time buying.
“The buoyancy in the sectional title market in the high density urban areas has seen developers coming back into the market, while the high rental demand and recovery in tourism has boosted the buy-to-let market.”
Pre-2013, buyers were holding back, waiting and watching house prices. By early last year, Seeff says prices had settled and, realising that if they were going to buy smart, the time was right, buyer urgency gathered momentum. Not even the 75-basis point interest rate hike has deterred buyers, and they continue flocking to show houses in record numbers.
The renewed commitment to invest in bricks and mortar has seen much of the old stock selling in rapid succession, and the tide in the high demand urban areas has turned from an overwhelmingly buyers’ market to favourable selling conditions, he says. The early part of this year saw estate agents faced with a somewhat unexpected challenge - severe stock shortages and a backlog of eager buyers just waiting for the next new listing. Homes started selling faster and, while the market average is at 12 to 17 weeks, well-priced property now sells within a week of coming onto the market, and sellers are getting close to, and in many instances, even more than the asking price.
While the sub-R1.5 million sector remains the sweet spot, Seeff says the cheer has spread to the upper segment. Prime areas such as Cape Town’s Atlantic Seaboard and SOUTHERN Southern Suburbs, Sandton, Pretoria East and the top-end suburbs of Durban, all report a significant uptick in sales - and resultant stock shortages in the R5 million-plus sector, he says.
More R20 million-plus trophy homes have sold this year, when compared to 2013. He says in the Cape metro alone, about 39 sales, worth just under R1.2 billion, has been recorded, compared to just 25 sales of about R712 million during the same period last year. The four highest prices achieved this year include three Atlantic Seaboard sales of R55.86 million, R64.8 million and R70 million respectively, and a Bishopscourt sale of R30.2 million. Seeff says Sandton too has seen excellent pick up in the R10 million-plus sector, with a good few sales above the R20 million price mark, including the recent sale of two luxury homes in Bryanston for R30 million each. As usual, the last to join the property party - the secondary coastal leisure markets - are not too far behind. Here too a resurgence in demand has seen much of the old stock selling now, creating more favourable conditions for sellers, he says. Land sales are up as well in the primary urban areas, and much of the discounted land stock in the coastal areas is now selling.
Aside from local buyers driving demand, foreign residents and visitors from the UK, Europe, and increasingly from sub-Saharan Africa and the Middle and Eastern markets, are capitalising on the weak rand, and investing more in local property.
While the average national house price growth of around eight percent is keeping pace with inflation, Seeff says it will remain curtailed by the rising costs of basic utilities such as electricity.
“This aside, there are encouraging signs within the high demand areas, especially the sectional title market and security estates, that are seeing strong double-digit growth upwards of 12 percent, and over 20 percent in some areas.”
Interestingly, these levels are reminiscent of the early 2000s, just before the boom kicked in, and better than in 2010, he says. Seeff says he also expects that the slow rate of new stock coming into the market, largely as would-be sellers are more confident about holding on to their property, will further boost prices into the new year. While the 2015 landscape will no doubt be dominated by lacklustre economic and job growth and rising costs, including potential tax and interest rate hikes, Seeff believes that contrary to the reservations expressed by some market commentators, the uptick in the housing market will be sustained into next year.
“There is still a significant appetite to buy, and this is likely to keep sellers in the driving seat into the new year”. An improvement in the economy will just serve as a further boost for the market, he says.