The South African Residential Property Forecast for 2019
Over the past month we’ve seen the executives of a number of the top property groups in South Africa share their forecasts for 2019. Overall the sentiment seems to be cautious, with most predicting a continuation of 2018’s muted market. Political uncertainty, (particularly surrounding land appropriation without compensation); the impact of the recession (which the country emerged from during the third quarter of 2018); rising fuel costs; and the VAT increase, all added to a slow-down in the market in 2018, and are expected to continue to impact the market in 2019. The forecast isn’t completely negative however, and there are opportunities for investors, particularly in the buy-to-rent sector of the market.
What the local property market leaders are saying about 2019
In a recent Property 24 article, Chris Renecle, MD of Renprop, wasn’t overly optimistic about the market outlook, suggesting that in order to show any kind of improvement and growth in 2019, South Africa’s property market will “require policy certainty, especially around the land appropriation issue, as well as investment and an economic boost. He has no expectation of a major recovery in any market sector in the year ahead.” He stated that “The market is currently skittish, with many adopting a wait-and-see attitude, and this is likely to continue for a number of months.” He noted that the residential rental market remained buoyant in 2018 and this was expected to continue as demand for rental units increased during 2019, particularly where rentals are pitched around the R5000 per month mark.
This sentiment was reinforced by Tony Clarke, managing director of the Rawson Property Group’s, explanation that the property market is cyclical, and that a dip in one segment often boosts another segment. In this instance, the higher rental demand creates opportunities for buy-to-let investors.
Arnold Maritz, southern suburbs co-principal for Lew Geffen Sotheby’s International Realty, also believes the market will stay similar to what it is now. “It has become evident that growth in the national economy may not increase much until there is more certainty regarding the future, which will include issues around the mining charter, attracting foreign investment, and land expropriation. There may only be significant changes after the outcome of the 2019 national elections.
Seef’s executives in Gauteng agreed in October 2018 that it would likely remain a buyer’s market for the foreseeable future, but that no market is without opportunity even when facing challenging conditions. Charles Vining, Seeff’s MD in Sandton said they expect property demand to steadily increase as buyers are becoming more positive and more committal, “Increases in the cost of living as well as the impact of tax increases (VAT, municipal rates) and economic uncertainty has made buyers cautious, but this is countered by the fair pricing by serious sellers and the banks’ healthy appetite for lending at present.” The property group’s chief executive Stuart Manning, said indications are that the economy is poised for growth “if we can just clear a few hurdles”. The company expects an improved luxury market performance into early 2019, and further improvement post elections as local buyers become more settled.
Gerhard Kotzé, MD of the RealNet estate agency group was more upbeat in his predictions, saying he believes market sentiment will improve substantially after the mid-year elections, which will settle a lot of local uncertainties about the political and economic direction that SA will be taking for the next few years. He cited three positive indicators seen in December, including the large drop in the petrol price, a return to positive GDP growth (2, 2 percent in the third quarter), and an increase in the SA Chamber of Commerce Business Confidence Index for the third month in a row as reasons for his optimism.
What the banks are saying about the South African Property Market in 2019
John Loos, property sector strategist at FNB Commercial Property Finance says we can expect ongoing gradual real property price correction in SA in 2019, and that 2019 will likely make the fourth consecutive year of average price growth slowdown. For the coming year, FNB projects nominal average house price growth to be 3.7%, which also translates into another year of house price decline in real terms.
Both FNB, and Absa’s latest property data shows that property market indicators continue to deteriorate with properties staying on the market for longer, and sellers increasingly cutting prices. Current conditions favour buyers and are expected to continue into early 2019.
As YDL Property Investments specialises in investment opportunities in Atlanta, Georgia, we thought it would be good to keep you updated on how the US property market is fairing going into 2019.
An overview of the US residential property market
Lawrence Yun, chief economist at The National Association of Realtors (NAR), predicts solid growth over the long term in the US housing market. In a December 19th 2018 release, data showed that existing-home sales increased in November 2018, marking two consecutive months of increases, with three of four major U.S. regions seeing gains in sales activity in October.
Total existing-home sales completed transactions that include single-family homes, town-homes, condominiums and co-ops, increased 1.9 percent from October to a seasonally adjusted rate of 5.32 million in November. Year-on-year sales are down 7.0 percent from 5.72 million in November 2017.
Yun, said the two consecutive months of increases is a welcome sign for the market. “The market conditions in November were mixed, with good signs of stabilizing home sales compared to recent months, though down significantly from one year ago. Rising inventory is clearly taming home price appreciation.”
The release showed the median existing-home price for all housing types in November was $257,700, up 4.2 percent from November 2017 ($247,200). This price increase marks the 81st straight month of year-over-year gains.
Properties typically stayed on the market for 42 days in November, up from 36 days in October and 40 days a year ago. Forty-three percent of homes sold in November were on the market for less than a month.
Yun added that while “Inventory is plentiful on the upper-end, but a mismatch between supply and demand exists at affordable price points. Therefore, facilitating real estate development of affordable housing units in designated Opportunity Zones can provide better housing access in addition to boosting the local economy.”
Atlanta’s outlook for 2019
Atlanta – YDL’s specific focus area in the US – is one of the Top 100 Largest U.S. Metros. Realtor.com’s® 2019 National Housing Forecast predicts that while there will be a slight drop (-1.9%) in sales growth, there will be a positive 3% increase in price growth in 2019. It will remain a seller’s market, however homes will be expected to remain on the market a bit longer. This may give buyers room to negotiate if sellers want a quick sale.
2018 saw many areas of the city experience phenomenal growth in prices, attributed largely to the Beltline. At the end of 2018, the median price for a 3-bedroom single-family home in the West End was $356,000, while the median rent for a 3-bedroom single-family home was just under $1,400.
In Cascade Heights in southwest Atlanta, the median price for a 3-bedroom home was $269,000, a 57% increase over the previous year. The median rent for the same number of bedrooms was $2,500 a month. Buckhead saw a 9% increase over the prior year with the median price for a 3-bedroom single family home price reaching $580,000, while the median rent for the same number of bedrooms was $3,275 a month.
Midtown median price for a 3-bedroom single-family home was $675,000, an 8.5% increase over the previous year, while the median rent for the same number of bedrooms was $2,662 a month.
Private Mortgage Lending lets you invest in international property with far less risk
With South Africa in the midst of a buyer’s market, the local opportunities are certainly there for liquid investors, however there is an increasing wait-and-see attitude, as South African’s await the outcome of the elections, and further clarity on amendments to the land expropriation act.
For some, it is proving the right time to boost their income by taking advantage of opportunities to invest in international real estate without purchasing a physical property, while they keep an eye on the local property market. By selecting private mortgage lending – an increasingly popular alternative investment vehicle – investors are able to invest in property without the need to physically purchase one (and the stresses that come with second-home ownership).
- Renprop commentary: https://www.property24.com/articles/what-can-we-expect-for-sas-property-market-in-2019/27835
- Seef’s and Lew Geffen Sotheby’s International Realty commentary: https://businesstech.co.za/news/property/278427/heres-what-you-can-expect-from-gautengs-property-market-right-now-and-leading-into-2019/ and https://www.property360.co.za/news/what-property-experts-say-we-can-expect-16013275
- RealNet commentary: https://www.iol.co.za/business-report/economy/property-outlook-upbeat-for-2019-18573134
- FNB commentary: https://www.fin24.com/Money/Property/house-price-growth-expected-to-slow-again-in-2019-20181228
- USA stats: https://magazine.realtor/daily-news/2019/01/02/better-days-coming-in-housing-for-2019 and https://www.nar.realtor/newsroom/existing-home-sales-increase-for-second-consecutive-month
- Atlanta figures: https://atlantafi.com/atlanta-real-estate-outlook-for-2019-rising-rates/ and https://www.realtor.com/research/2019-national-housing-forecast/
Some Past Deals
- Private Lending-Wholesale (USA)
- Private Lending-Rehab (USA)
- Flipping (USA)
- Buy-to-Let (USA)
- Speculative (SA)
- Buy-to-Let (SA)