2015 - a good year for property

2015 is likely to be a year in which the residential property market continues to see significant value growth and to experience conditions in which the major estate agencies achieve increases of at least 20% in their turnover.  

This was said recently by Bill Rawson, Chairman of the Rawson Property Group, who added that in the current scenario, demand for accommodation in all of South Africa’s high density areas still exceeds supply.

The whole of 2015, said Rawson, is likely to feel the benefits of the largely unexpected but big fall in the oil price:  at a Brent Crude price of US$50.04 per barrel, it will, he said, be easy for South Africa to contain its inflation within the 6% target bracket.  (He in fact predicted that inflation will be down to 5,5% by mid-year.)  Furthermore with significantly lower fuel prices, the man-in-the-street will have slightly more disposable income this year and is therefore again likely to turn his attention to home ownership.

The shortage of housing throughout the country, said Rawson, will ensure that year-on-year house price inflation in the high density areas is above 10% and rents will continue to rise by even larger percentages.

However, said Rawson, the lower petrol prices coupled with the startling improvements in fuel saving in today’s cars (Rawson mentioned a new 1,3 litre model on the market with an advertised fuel consumption rate of 5,5 litres per 100 km) should make it possible for home sellers, landlords and developers to operate and prosper further away from the major CBDs.  In the Greater Cape Town area, he said, suburbs like Kommetjie, Simon’s Town, Melkbosstrand, Strand and country towns like Wellington and Paarl could find themselves increasingly incorporated in the Greater Cape Town commuter belt.

Developers, said Rawson, have continued to look for viable densification opportunities in the high density areas – despite the big prices now prevailing – because the call for this type of accommodation remains very strong.  What is significant, he said, is that the skills required to recycle the buildings so as to turn them into suitable accommodation are more and more in evidence and are playing an increasingly big part on the development scene.

Along with the focus on urban areas, there will, too, said Rawson, be an increased demand for energy saving systems – and here the state must be more proactive and promotional because the average man-in-the-street, while recognizing the importance of green energy saving systems, still often does not fully understand them.

Asked if South Africa’s political performance – particularly Eskom’s problems – is proving a deterrent to investment, Rawson said that private enterprise tends to find ways of circumventing these difficulties and coming up with viable alternatives where the state has let them down.  Rawson Developers, he said, will roll out R1 Billion worth of accommodation projects in 2015/2016 and the Rawson Property Group, as indicated, expects to exceed the 21% growth that they achieved in 2014.

Rawson commented that the steady increase in tourists to the Cape will open up marketing opportunities to the more enterprising Cape Town estate agents.

“Last year,” he said, “the Western Cape Institute of Estate Agents reported that a satisfactory number of the area's 1,4 million foreign visitors actually ended up buying a property here.  With the rand at its extremely low levels and with air flights to South Africa becoming easier year by year, I think that this figure could rise over the coming year by 50%.”

Cape Town Tourism report that British Airways will be operating seven additional services between 1st and 11th January 2015 and other airlines, notably Qatar Airways and Edelweiss Air, are also arranging additional flights.  This is yet another sign, said Rawson, that tourism is looking up.

Rawson added that foreigners buying in South Africa are on an easy wicket compared to those buying in many other countries as there are no serious restrictions.  Although foreigners are expected to put down a 50% deposit, they are allowed to gear the rest with a local or overseas bond.   In certain quarters, he said, the selling of property to foreigners is considered unpatriotic.  It should be remembered, however, that such people add significantly to the country’s GDP by the money they spend here and, in his experience, in a small minority of cases end up investing in local businesses, again to the benefit of the country as a whole.

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