It’s hard to believe another year has almost passed. If we had to characterize the local real estate market for 2016 we would say it’s been strong, stable, and steady. There haven’t been any nasty surprises. Sure, we’ve had interest rate increases, but they were expected.
We expected a strong influx of buyers from Gauteng and KZN – and that’s exactly what happened. We were optimistic that strong buyer demand for local and Cape Town property would ensure our market stayed strong, despite the expected pressures on the national property market – and we were correct.
So what can we expect for 2017? There is no crystal ball, and we would certainly agree that we live in unstable times. Let’s look at the most likely scenarios for next year.
There is no reason to expect this to change. Our lifestyle is very desirable and our local infrastructure works efficiently. We anticipate this trend may even strengthen if municipalities in Gauteng become dysfunctional due to political infighting. We also expect the number of overseas buyers to increase as political problems in Europe and the USA increase – but that this should be in the mid price-range.
Unfortunately there are no indications that the economy will improve or that the Rand will strengthen. Continued pressure on our currency, increasing inflation, and the possibility of a ratings downgrade (we’ll know next week) will mean any movement will be upwards. Expect increases and budget for them. This will impact on buyers’ affordability and the prices they can purchase for.
As with all markets, pricing is driven by supply and demand. Demand will be high in the mid price range, but not necessarily at the top end of the market. We anticipate good property value growth of 12-15% in the mid-to-lower price ranges, with 7-10% in the higher price ranges.
In response to the increasing buyer demand we are expecting to see a lot more new development over the next few years. Smaller homes on smaller plots in secure estates with strong lifestyle offerings will be the main offering – with luxury apartments and luxury boutique estates also being prominent. There are attractive investment opportunities for those who get in first and purchase off plan.
There is no doubt that, as crime levels increase, so the demand for security increases. As demand is strongest in secure estates, expect these property values to increase at a faster rate than those outside estates.
More and more homeowners are conscious of the need to conserve water and electricity. With new solar systems being more affordable and efficient, buyers will be attracted to properties that offer a “green” solution.
Let’s hope that the ratings agencies are patient with us. The outlook for property in the rest of South Africa is not nearly as rosy at is locally – with economic pressures set to increase. In any event, owning property is a smart investment and, barring anything unforeseen, we can look forward to another stable year for local property in 2017.
Principal, Harcourts Platinum