An optimistic outlook for Cape property in 2019, says Greeff
With 2018 officially behind us, we cast our eyes to the year ahead. What does 2019 have in store for the real estate sector? Will this year be more of a roller coaster than last year? Or will this year see smoother sailing for a sector that has had to weather tumultuous times? Greeff Christie's International Real Estate makes some predictions on the road ahead.
"While the future is never certain, I am quietly optimistic about the real estate sector in 2019. The Western Cape has seen off water shortages, has excellent infrastructure that is constantly being improved and the political uncertainty has calmed. Whether you are contemplating buying your first property, investing, looking to upgrade or scale down, it pays to have the expertise of reputable agents by your side. A good agency can take all the uncertainty out of a property transaction." Mike Greeff, CEO of Greeff Christie's International Real Estate.
In keeping with the government's vision of economic development and foreign investment, President Cyril Ramaphosa embarked on an aggressive campaign of marketing South Africa to heads of state at the World Economic Forum at Davos 2019. The much-anticipated speech left South Africans with a clearer idea of government's plan for the future.
President Ramaphosa highlighted the theme for the year, including his hopes for the country to be on the path of renewal and growth. He touched on a report released by UNCTAD (the United Nations Conference on Trade and Development) on the foreign investment the country received over the last two years. The report indicated the influx of investment the country received between 2017 and 2018.
A growth of 440% which saw an increase in direct foreign investment from $1.3 billion to $7.1 billion. This growth is something that the government is striving to sustain and grow in the coming years.
A growth of 440% which saw an increase in direct foreign investment from $1.3 billion to $7.1 billion. This growth is something that the government is striving to sustain and grow in the coming years.
The creation of the Zondo commission that is looking for evidence relating to the 'capture' of state institutions and processes by private interests is also having an encouraging effect on the economic sector and will likely continue to do so as more information comes to light. The eradication of blackouts is also something that government is attempting to achieve with the implementation of a plan to bolster the energy supplier's finances as well as ensuring uninterrupted energy supply to the country.
President Ramaphosa also assured delegates that South Africa is dealing with land reformation issues in a manner that takes all interests into account and is fully in line with the laws and the Constitution of the country. These remarks by the President have certainly affirmed the country's new path after a prolonged period of stagnation.
President Ramaphosa also assured delegates that South Africa is dealing with land reformation issues in a manner that takes all interests into account and is fully in line with the laws and the Constitution of the country. These remarks by the President have certainly affirmed the country's new path after a prolonged period of stagnation.
Outcome of the General Elections
The upcoming General Elections are being seen as an opportunity to reboot the country's economy and negate much of the slowing that was experienced in the latter half of last year. The expectation is for a peaceful and generally incident-free election process.
While ruling parties may change from term to term, the general positivity associated with free and fair elections are far-reaching and will do much to bolster South Africa's reputation as a stable African democracy with a bright outlook. The outlook for the property market is deemed to be quite positive with regard to the political climate.
Stability is always welcomed by investors both locally and internationally and the increased speculation should lead to a slow and steady price climb in the high-end, luxury market. The upper end of the market is not the only area that should expect growth, homes ranging from up to R1.5 million should again be a significant contributor to sales figures.
Semigration expected to pick up
Semigration is expected to be on the rise once again. With the lifting of the water restrictions and Western Cape dam levels being much higher based on a year on year comparison, the city is once again increasing in appeal as a desirable semigration destination. As long as properties are priced realistically, the city should definitely see an influx of residents from other provinces. Towards the end of 2018, Cape Town was also named the 'Greatest City in the world' according to a poll conducted by The Telegraph, this additional endorsement will also greatly increase interest in the Mother City.
A further knock-on effect is that tourism is also expected to increase. Cape Town has a well-established reputation for being a tourist favourite and regularly tops international destination lists for places to visit. The city is hugely popular for its lifestyle appeal and world-class amenities. Property in the area is increasingly sought-after for its convenience and access to work nodes. Cape Town is also unique in its ability to foster work and lifestyle destinations within very close proximity of each other. This makes it almost effortless for individuals to transition between work and personal life.
The emergence of 'luxury' areas
Areas such as Simons Town, Noordhoek and Newlands are increasingly being seen as luxury areas with the sale of properties in the R10 million and upward price range. These areas may experience a discernible increase in price and demand over the coming months. This upswing is driven by a high-end market that is relatively unaffected by minor economic corrections and are willing to pay a premium price for the locations that they desire.
With regard to foreign investors, their urge to invest in South African markets will undoubtedly be buoyed by very favourable exchange rates and the invitingly low cost of living in South Africa. These areas boast excellent investment potential, access to the best schools and amenities as well as being steeped in history. It is this combination of unique factors that will enable the emergence of "new" luxury areas.
Flat Market Syndrome
A flat or buyer's market remains the status quo for the real estate sector. In 2018, Cape Town acutely experienced a period of market correction following a surge of prices over the prior five-year period. The period of normalisation or correction results in lower growth rates and a slowing of the sector. This is a trend that is expected to continue throughout the greater part of 2019 despite the fact that the Western Cape was South Africa's best performing province with 9.9% house price growth according to the Lightstone Residential Property Indices.
Although market sentiment is expected to increase, it will take some time before the market picks up and moves significantly in either direction. The impact of flat pricing is that buyers have more leeway to negotiate but should also bear in mind that the best time to buy is always now and that prices will only ever move upward. Any delay in purchasing will only result in paying more for the property in question.
The year ahead may be filled with the unexpected but with a little bit of foresight, sound planning and practical, professional advice, we will aim to remove most of the uncertainty from your 2019 real estate planning.
15 Feb 2019
Author Greeff
