Absa’s guru on financial trends in the residential market, Jacques du Toit shared some interesting facts and predictions for 2018.
The residential property market showed a relatively muted performance during 2017. This was based on:
- Depressed economic growth, consumer financial strain and low consumer confidence
- Nominal price growth of around 3.7% year-on-year up to November, with prices deflating in real term after adjustment for the effect of inflation
- Household mortgage balances growth of 3.3% year-on-year up to October
- Properties listed on the market for about 15 weeks in Q1 to Q3 before being sold
- 92% of properties sold below asking price in Q1 to Q3
- Average drop of 8% in asking prices in Q1 to Q3
- Number of building plans approved for new housing dropped by 0.3% year-on-year in January to September
- Number of new housing units built down by 2.4% year-on-year in January to September
- Building confidence on a declining trend in Q1 to Q3
Prospects for 2018:
- Economic growth to show moderate rise, but to remain relatively low at 1.1%
- Consumers will face continued financial strain, which will impact confidence and the ability to take up credit
- Nominal property price growth of 3%-3.5% expected, with further real price deflation on the back of a projected inflation rate of 5.2%
- Mortgage balances growth to remain low between 3% and 3.5%
- Other market indicators such as period of properties listed before being sold, percentage selling below asking price, percentage drop in asking prices, building activity, building confidence and general property market sentiment are expected to remain under pressure and be much in line with trends in 2017
- Housing and mortgage finance affordability will remain key factors, which may be reflected in demand and supply, buying patterns and transaction volumes.
Du Toit cautiously notes that the current forecasts are a base scenario, which do not incorporate a shock, whichever direction it might go, as politics cannot be predicted.