Pam Golding Properties Group Newsletter
PGP logoDate: January 2012

Andrew Golding
Dr Andrew Golding
Chief Executive
Pam Golding Property Group

Year begins on a positive note

Benign inflation and interest rate environment positive for home ownership

South Africa’s residential property market in 2015 has begun on a favourable note, following a busy festive season and with a continuance of positive market sentiment and improved activity across all regions.

From a group perspective, we are also delighted to have received a number of prestigious international awards at the end of last year (2014) recognising the PGP brand and the exceptional sales success of the many individuals that make up the company.

Buoyed by reduced fuel costs and historically low interest rates, it appears that the positive residential property environment that prevailed over most of last year looks set to continue for the foreseeable future.

Sustained high demand

As far as the market is concerned, the year kicked off with high market activity and demand with stock shortages in sought after nodes and areas - further boosted by the return of investors and growing interest from commuters. With an oversupply of well-qualified discerning buyers, these shortages remain evident in most metropolitan areas of the country – including Gauteng, where in many suburbs the demand for homes considerably outstrips supply.

Furthermore, we anticipate we will continue to experience a strong rental market characterized by high tenant demand and rising rental yields – further boosting buy-to-let and investor confidence in the year ahead.

Market trends

Other trends include a re-emergence of the coastal and second home market, and we are also seeing the increasing importance of first-time buyers seeking to gain a foothold in the market and acquire their own homes. Coupled with this, after a protracted slump, building activity has recovered and we are likely to start seeing more stock come onto the market – including units in new developments.

In addition, on the back of stock shortages, we continue to see the re-emergence of the development or new build market, coupled with an increasing demand for sectional title properties, as well as a local and global trend towards mixed-use developments enabling a ‘live, work, play’ lifestyle. Park Central, a groundbreaking luxury, high-rise development set to become the landmark residential building in Johannesburg’s Rosebank area, is a case in point and indicator of developer confidence in the area.

Lower inflation

Current lower inflation coupled with a stable interest rate is obviously good news for the local residential property market. In recent years, growth in house prices has outstripped growth in personal disposable income – resulting in a modest deterioration of housing affordability. Lower inflation and a subdued interest rate cycle will bolster household disposable income, helping to offset this deterioration to some extent.

However, the benefits of the more benign inflation and interest rate environment may not be enough to positively impact the economic growth outlook. While the slump in oil prices benefits us by reducing the cost of imports, the simultaneous decline in other commodity prices is hurting our exports. And a substantial trade deficit makes the Rand vulnerable to further bouts of weakness.

In addition to a tepid global growth environment – hence the weak commodity prices – South Africa faces additional local headwinds including load shedding, the prospect of further labour instability and infrastructure bottlenecks. As a result, growth is not expected to exceed 2.5 percent this year.

House price growth

Until such time as the economy is growing at a more robust growth rate, and is generating significant new employment opportunities, the local residential housing market is unlikely to enjoy more than at best low double digit growth in prices. What the property market needs is a return to the pre-recession growth rates of 5 percent to 6 percent accompanied by strong employment creation and healthy growth in salaries and wages.

An interesting point worth bearing in mind is that the sustained upturn in the residential property market helps create stability and optimism within an environment of investment uncertainty in the economy, and property can become a primary area of investment when other options appear volatile.

Tourism benefits

Following a busy tourism season, investment opportunities include the buoyant guesthouse market in the prime hotspots of Knysna and Plettenberg Bay on the scenic Garden Route, each of which see the residential population swell to around 110 000 during peak holiday periods. The agricultural sector also has its rewards, with a huge demand for sugar cane and macadamia farms in Mpumalanga achieving high return on investment amid a major shortage of stock.

Success of Mauritian development

For South Africans seeking their own tropical island paradise getaway or permanent residence, we are pleased to report that following the overwhelming success and uptake of the apartment and villa precincts in Le Parc de Mont Choisy Golf and Beach Estate in Mauritius, 20 new apartments have been launched while a further release of villas is imminent.

Finally, Pam Golding Lodges and Guesthouses offer pertinent advice for South Africans in regard to foreign loans – regarding new legislation which takes the form of a withholding tax on interest.

Monterey, 12-14 Klaassens Road, Bishopscourt, Cape Town, 7708, South Africa