Just Where are Property Values Going?

If only we had that crystal ball…. There are a myriad of different opinions on what the future will bring in terms of property values. But experts do agree on a few strong possibilities over the next few years.

It’s important, in making predictions, to appreciate that one fundamental need that all humans have is housing. Not only is it a need, it’s also a right.

That being the case we can correctly assume there will always be a demand for property. That’s an important fact, as all markets are driven by supply and demand. The greater the demand and smaller the supply, the great the price increases. The lower the demand and the greater the supply, the lower the prices. We only have to monitor the oil price fluctuations to see this to be true.

As we are all now aware, the drop in property values over the past few years has been a product of a global economic crisis, resulting from the irresponsible activities of financial powerhouses and governments. But it was also a correction of previously over-valued property – the product of 30% – 35% property price escalations in 2004 to 2006.

There is agreement by many that properties have de-valued to now represent excellent value. In other words, the necessary correction has taken place and values are market-related.

What the experts now agree on is that we are unlikely to see any significant growth over the next few years. In most cases market values will remain flat.

However, there could be exceptions. Areas of growth are expected to be around transport nodes. So people who work in Cape Town will now be able to live in outlying areas that are serviced by the Rapid Transport System. Or in Gauteng, nodes surrounding the Gautrain stations should offer a new alternative to those who work in Pretorian and Sandton. And where the demand increases significantly, so do prices.

There is still a noticeable demand for Western Cape properties from those living further north in South Africa. If this demand continues, there is a good possibility that future growth in property values could exceed national averages. But this is a medium to long-term view, and no remarkable growth in the short-term is expected.

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Positive news for the consumer is that inflations rates seem to have been brought under control, at least for now. This means that, while it was anticipated interest rates would increase later this year, there is now a strong case for interest rates to be dropped later this year, or early next year.

This always has a positive impact on the property market as it means purchasers are in a position to afford a higher mortgage bond. This encourages many to purchase who may have been holding off.

So, if you’re a purchaser it would appear that now is the best time to buy property. Interest rates are low, property values have depreciated to the point they now represent great value, and it is unlikely prices will fall further.

If you are a property seller it seems unlikely that the value of your property will improve much in the short-term. But if you don’t need to sell, then don’t. If there are no further global economic meltdowns we should see healthy growth in property values in 5 – 10 years.

As uncertain as the future may be, one thing is for sure: We all need a roof over our head. Property remains a solid investment over time and provides you not only with a home, but with an asset that will grow and prove more resilient than many other forms of investment.

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