Real Estate Investor Magazine South Africa June 2015

REI RESIDENTIAL RESIDENTIAL PROPERTY MARKET REMAINS RESILIENT EXPERT Q&A WESTERN CAPE THE PLACE TO INVEST IN PROPERTY A steady increase in first-time homeowners continues to provide a healthy and fundamental underpinning for South Africa’s residential property market, which remains steadfastly resilient. Despite an unexpectedly weak start to 2015 for the South African economy – largely due to the impact of nationwide load-shedding - the performance of the local residential property market continues to compare favourably relative to other global markets. Furthermore, the loss of momentum in local house price inflation has been limited. Prevailing low interest rates, a modest improvement in household disposable income and a marginal strengthening in the overall economy suggests average house price inflation of high single digits this year. With inflation forecast to average just five percent in 2015, it is anticipated this will allow for a real increase in house prices. According to the Pam Golding Residential House Price Index, national house price inflation peaked at 6.7 % in the third quarter of 2014 and has since eased to an average of 6.3 % in the first quarter of 2015. The price performance in the lower price band, which has been the strongest performer of late, appears to be losing momentum. The pace at which prices are increasing is clearly slowing and it appears that buyers in this price band may be starting to feel the impact of the recent deterioration in economic conditions. The PGP Index reveals that the underlying trends previously identified within the various price bands remain largely unchanged. John Loos Economist and Property Analyst FNB While we have come a long way in terms of the racial transformation of residential property ownership, there appears to have been slower progress made in recent times, arguably the result of a poorly performing economy. Previously disadvantaged race group buying in former suburbs appears to have ‘treaded water’ in 2014. Kay Geldenhuys Financial Manager ooba The Reserve Bank Monetary Policy Committee will leave the repo rate unchanged. The stable interest rate is good news for the residential housing market as it gives prospective homebuyers an opportunity to acquire property and secure home loan finance at an affordable cost of credit. The property market outlook remains positive with steady house price growth and increased lenders’ confidence. www.reimag.co.za Lanice Steward Managing Director Knight Frank Residential South Africa Q Why is the Western Cape the best place to invest at the moment? According to John Loos’ latest FNB Property Barometer report on Western Cape residential property, the national average property price increase was 6,6% year on year at the end of 2014. Once again the Western Cape has come through as a ‘shining star’ as a place to invest. Q What was the real house price growth and average house price? Although 1, 4% down on the fourth quarter of 2013 (15, 2%), prices still rose by 13,8% year on year in 2014 in the Western Cape. The figures, once adjusted, show a real house price growth of 2, 74%. The average house price in the Western Cape were R1 272 303 in the fourth quarter. Q How does this affect affordability and economic growth? The overall economic growth for the year was weak. Affordability issues might be rising and disposable income growth has not kept up to the price growth levels. Q How long are homes on the market? Homes on average are taking three months to sell. The time it takes for homes to sell, however, is often indicative of whether homes are priced correctly. Sellers must, therefore, not think that they can achieve more than the market value for their home and out-price their property. The closer the price is to the buyer’s expectations, the faster the property will sell. JUNE 2015 SA Real Estate Investor 21

Real Estate Investor Magazine South Africa June 2015 | Page 23