The time has come to start believing in residential property once again

Until now, many younger South Africans who qualify as home buyers have simply not regarded property as an investment opportunity. This is as a result of the market flat-lining for the past 10years*. They have not yet become fully au fait with the financial benefits of home ownership.

Most of them may well be unaware of the extent to which residential property has withstood virtually every bad economic cycle and crisis – even in South Africa’s most turbulent socio-economic and-political times. For the older generation, owning a residential property has long been a cornerstone of virtually any investment portfolio (along with investment in the listed share market). For many, it has been the key element. After flat-lining for the past 10 years*, the residential property market is now showing clear signs of a turnaround – albeit at a relatively slow rate of price appreciation at this early stage. This will please seasoned home sector investors.

Positive market indicators

The uptick in sentiment – which is expected to be sustained – is being driven by the positive swings we are seeing in key market indicators. For instance:

• FNB’s consumer confidence index for the first quarter of 2018 rose to a record high for the past 10 years – based on the positive economic outlook for the next 12 months

• Growth in private sector borrowings is on the rise

• The consumer price index is at its lowest level in seven years

• Global ratings agency heat is cooling down

• Projected GDP growth for 2018 is +2%

• The World Bank has upped its national growth forecast for South Africa.

Another positive national market indicator is that financial pressure on home owners is seemingly lifting.

Less selling to downscale

Meanwhile, the FNB Property Barometer points out that the percentage of national home sellers who are selling to downscale due to financial pressure declined in the first quarter of 2018. This was the first time it has fallen since the third quarter of 2016. Looking at the broader national economic landscape, it is encouraging that now, with firmer hands on the national purse strings, South Africa has reportedly moved much closer to global best practice in its approach to economic policy.

Improved market sentiment

The change in Government leadership just a few months ago, with President Cyril Ramaphosa now at the helm, has obviously been the catalyst for the upward nudge in residential property market sentiment nationwide. This will help encourage faith in the oldest investment philosophy - that property ownership is a vital cornerstone in any investment portfolio.

*Source – FNB Property Barometer