The residential property market

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Real estate set for solid gains in 2015

The residential property market is fairly well-balanced at the moment and prices can be expected to rise by an inflation-beating 8 to 9% in the next 12 months – except in gated estates and certain “hot pockets”, where they are likely to increase even more.

That’s the opinion of Lew Geffen, chairman of Sotheby’s International Realty in SA, who says the latest decision by the Reserve Bank to leave interest rates unchanged, combined with lower fuel and food prices, will obviously boost consumer sentiment and the demand for residential property going into the new year.

“However, the economy is still weak and over the next 18 to 24 months, we foresee that interest rates will have to move somewhat off the current low levels to attract investment and create employment – and while that will probably not do much to slow housing demand, it will affect housing affordability.

“Consequently, we expect that while the banks will be keen to approve home loans, they will maintain their strict credit criteria and keep a tight rein on property valuations, thereby helping to prevent the market from overheating in the face of the current shortage of supply.”

Meanwhile, he says, the latest building plan statistics show that developers can be expected to start bringing more new projects on stream early next year and that this trend is likely to gather steam fast, so that by 2016 the stock shortage will be alleviated and buyers will have a greater choice of homes to buy.

At the moment, however, the market remains favourable for sellers, although this does not mean that they should be tempted to raise their asking prices to levels that are inconsistent with the market value of their homes. “As mentioned, the banks are still cautious when it comes to property valuations, and in addition to that, today’s buyers are generally well-informed and very value conscious.

“Well-priced properties, on the other hand, are moving very quickly because of the supply shortage, and there is thus an excellent opportunity now for existing owners to sell and move on to their next home.”

Geffen says the fact that interest rates are still low makes it an especially good time to upgrade to a bigger home or a better area, especially if you have equity in your current home that you will be able to use as a deposit on the new property and so reduce the size of the home loan you require.

“Having said that, however, this is no time for prospective buyers to be sitting on the fence and waiting for prices to go down as development activity picks up and supply increases. Firstly, steady increases over the past few years have now put prices back where they were prior to the 2008/ 09 crash, and they are set to stay on an upward course.And secondly, ever-rising building input costs mean that the prices of new homes will always be higher than those of equivalent pre-owned homes.

“These considerations, plus the expected small interest rate increases over the next couple of years, will make it increasingly difficult for buyers to qualify for home loans, so they should seek out well-priced properties and decide on a purchase as soon as possible.”

Article by: www.sothebysrealty.co.za

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