SA residential property’s big picture remains encouraging

Despite the flat line of sentiment that has consistently prevailed in the South African residential property market over the past few years, the big picture remains encouraging for the majority of both existing and aspirant homeowners.

More so now that the dust is settling on the seismic change that has been brought about in the country’s political leadership under the presidency of Cyril Ramaphosa. How the transition continues to roll out from here onwards remains to be seen. Meanwhile, the positive effect that it has generally had, so far, on the national psyche has been most encouraging. It has even reached across to South African nationals working abroad. So much so, that there are early signs that many are planning to return home. This was confirmed by Faye Tessendorf, managing director of Homecoming Revolution – a Johannesburg-based international head hunting firm that specialises in bringing African talent abroad back to South Africa and the rest of the Continent.

A changed narrative

“Here at home, the whole narrative has changed in the post-Ramaphosa era – even at this early stage. And it has had a massive impact on South Africans working abroad,” says Tessendorf. “We are now seeing a free flow of expatriate executives who are firmly set on returning home,” she adds. 

These home-coming expats could become a welcome positive force in a Johannesburg / Sandton residential property market in which current home prices have generally been at their cheapest in the past 20 years, relative to the basket of items the consumer spends his money on. Prospective buyers who are hard currency-flush will be spoilt for choice – because an oversupply of stock has built up across a broad spectrum of Jozi’s higher-end suburbs. They include Hyde Park, Sandhurst, Westcliff, Bryanston and Houghton. Other more middle market areas are also offering excellent value now. 

Undervalued prices

The reality is that homes in Johannesburg are currently undervalued. So much so, that several homeowners in the city’s Northern Suburbs and Sandton have been selling at prices below levels that prevailed three to five years ago. This presents extremely attractive opportunities to buyers generally, and hard-currency investors. And it comes as no surprise, given that the rate of acknowledgement of debt to banks (where a sale concluded doesn’t cover the outstanding bond) is now on an uptrend in South Africa. 

Meanwhile, any modest growth that has manifested in the market has been largely cancelled out by the recently-inflicted one per cent rise in Value Added Tax and other increases including rates and taxes and petrol. The Rand may well remain on a trajectory that will be user friendly to investors with hard currency.  For them, buy-to-let opportunities will also start improving.