Sibonelo Radebe
10 October 2001
The local residential property market is resilient enough to maintain an upward swing despite the likelihood of economic turbulence in the wake of the US terror attacks.
Responding to concern that the upswing which resumed in 1998 after two decades of negative growth could be cut short, major players in the residential property market say it will survive the turbulence.
Strong economic fundamentals, mainly declining and stable interest rates, fuelled the recovery of the residential property market.
Absa's residential property market survey for the second quarter of this year showed average house prices increasing 12,5% in nominal terms, or 5,7% in real terms. Last year's increase for the corresponding quarter reflected a 17,7% nominal and an 11,7% real price increase. Absa, releasing these figures, said stable to lower mortgage rates would continue to support the housing market, and it expected house prices to continue to rise.
A lot has changed since these statements were made, but observers believe house prices will continue to climb.
Nationlink chairman Piet Botha says growth in home prices seems likely to be maintained in the coming months, despite confidence knocks in the form of rising fuel prices, widespread industrial unrest and the attacks in the US. "We are seeing quite a lot of investment capital being shifted from equities into residential property, and this should sustain demand., says Botha. Considering that there is already a significant imbalance between demand and supply in many areas, we expect home prices to continue to rise, and to have grown at least twice as fast as inflation by the end of this financial year," says Botha.
Pam Golding Properties Gauteng MD Ronald Ennik says the recovery that began in 1998 has gathered momentum countrywide.
He says the residential market's resilience was evident in mid-1998 when, after a few months of spectacular improvement in the residential market, three calamities the collapse of world markets, a 7% jump in interest rates within a couple of months, and the rand's depreciation by more than 30% failed to reverse the trend. "Each one of these would normally have been enough to change the direction of the market. The demand for residential property underpinned the market ... and once the dust had settled, demand continued to boost the market to levels where property prices were appreciating at about 15% to 20% a year," says Ennik.
The emergence of black home buyers was a further boost to the market, and residential property developers and speculators have returned, he says. This is borne out in official figures: Residential building plans passed were 22% up on last year's figure.
For the first time in 20 years, says Ennik, the investment potential in residential properties is strong enough to attract interest from investors who usually prefer to invest in the stock market.
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