Home buyers and those with mortgages will be encouraged by the announcement by the Monetary Policy Committee of a 25 basis point reduction in the repo rate, says Dr Andrew Golding, chief executive of the Pam Golding Property group.
“Consumers could use some positive news right now and this downward shift, albeit only a quarter of a percent, is important as it sends a positive signal to the market and hopefully heralds the start of a downward shift in the interest rate cycle. It will also impact favourably on market sentiment and therefore, activity in general.
“With inflation seemingly under control and the rand looking stronger, and against a backdrop of a sluggish economy, what South Africa needs is a stimulus for economic growth and investment.
“Despite the economic and socio-political challenges faced both locally and globally, South Africa’s residential property market remains notable for its ongoing resilience and appetite for property investment. In a sense one could say that it’s business as usual for the many citizens who are getting on with their lives and transacting in home acquisitions and sales for all the usual reasons.
“These include buying that first home, upgrading or downsizing according to changing lifestyle requirements, relocating for career moves or a desire for a different residential destination or region, buying a leisure home or a place to retire to, or acquiring property purely as an investment – including steady rental income generation.”
Dr Golding says there are two main segments that currently form the backbone of market demand – first time buyers and those seeking sectional title properties.
“Top performing sectors at present include the lower priced band under R1 million and the smaller two bedroom sectional title market – both of which reflect the consistently strong demand from first time buyers. Over and above this, steady activity continues in the middle and luxury segments of the market.”
Says Sandra Gordon, Pam Golding Properties senior research analyst: “South African demographics are strongly positive for the housing market. The local population is young with approximately two thirds of residents under the age of the typical first-time buyer (34 years) and hence not yet in the housing market. This will ensure continued strong demand from this burgeoning section of the market, particularly as a new generation of savvy young professionals reflect a growing aspiration to gain a foothold on the property ladder by investing in home ownership.
“The major metro markets are likely to benefit most from this demand, since South Africa’s population is urbanising at a rapid pace, causing major metro populations to become both larger and younger.”
Adds Gordon: “Affluence is currently a source of weakness for the national housing market as South Africa’s economic growth remains subdued. However, economic activity remains buoyant in several major growth nodes across the country. Cape Town, Gauteng and the North Coast of KwaZulu-Natal are all experiencing substantial private sector investment in major mixed-use developments, while government continues to invest heavily in infrastructure. And when there is economic activity and job creation, there is growing affluence and a vibrant local housing market.”