Jo’burg homes market outlook more positive

The residential property market in South Africa will be encouraged by the fact that the first quarter of 2017 showed a positive year-on-year growth in new mortgage loans* – after four prior quarters of decline. This may well be a flash in the pan, given the constant tidal flow of negative economic and political factors that have been at play – not least the issue of State capture. The Public Protector’s perceived ‘assault’ on the SA Reserve Bank and the nation’s Constitution is the latest development that will probably add traction to the process. The Johannesburg homes market will be heartened – albeit mildly – by some of the indicators that have emerged in the most recent FNB Property Barometer reports.

Gauteng recovery under way

According to John Loos, Household and Property Sector Strategist at FNB, the Gauteng market has already “seemingly started its recovery”. This is reflected in the fact that homes in Gauteng now average 12 weeks on the market before they are sold – an average of eight weeks less than the coastal metros*. Given that Gauteng is now officially the most affordable homes market among South Africa’s four biggest provinces, it is quite clear that Johannesburg, its largest Metro, is well placed for an uptick in home buying. The forces behind this phenomenon don’t have the nation’s financial and commercial interests at heart.

Therefore, they won’t welcome the groundswell of calls for the establishment of a judicial inquiry to unmask it. However, the improvement is likely to be mediocre at best, considering the fact that 89 per cent of Johannesburg sellers are reportedly currently having to drop their prices to close sales. Meanwhile, it is ironic that the widening national economic and political transparency that has evolved from the so-called Gupta emails, along with other ongoing revelations, has been good for property market sentiment. 

Comfort from transparency

Although it presents an ugly picture, the still-unfolding transparency provides some comfort. It lets existing and aspirant South African home owners know where they stand. And it thus places them in a better situation from which to make considered buy / sell decisions going forward. The impact of this process will probably reflect most clearly in the long-undervalued Johannesburg market, which reportedly now offers better value than over the past 20 years. It is, therefore, no coincidence that Johannesburg has been attracting by far the highest number of first-time home buyers when compared with major cities in other provinces. It’s all about affordability and employment opportunity. Furthermore, Johannesburg is the centrepiece of a Gauteng homes market that has the best home-price-to-per-capita-income ratio among the major provinces. It also has the highest proportions of both first-time buyers and youngest buyers.

Market confidence

Reserve Bank Governor Lesetja Kganyago said recently “South Africa’s fundamental problem right now is confidence. Weak confidence has profound economic consequences.” When people are as worried as they are now about the economy they don’t make large purchases, the Governor added. Nevertheless, flat-lining markets do invite contra-cyclical thinking. Buyers with the courage to take the plunge in the current climate could be well rewarded when the market turns – as it inevitably will in time. 

*Source: FNB Property Barometer