Residential property remain a good investment in 2016

During 2008/2009 when the worldwide recession impacted property markets across the globe, both the residential and commercial property markets in South Africa experienced a decline at the same time. 

“This was unusual to see, as usually the residential and commercial markets are counter-cyclical,” says Chris Renecle, MD of Renprop. “The interesting fact is that even though South Africa was not as affected as the rest of the world by the property market crash, we have not seen the same level of recovery in our markets as Europe and the US has. That said, we are now expecting to see a return to ‘normal’ in terms of the counter cyclicality of the residential and office space markets. The residential property market is expected to remain relatively robust, while we anticipate the office market will continue to experience lacklustre trading conditions in the year ahead.”
What Renecle believes has been evident over the past year is that residential property in Johannesburg’s northern suburbs continues to be a secure investment option. “While South Africa’s financial markets, currency and resources have been volatile for most of the year, residential property in most areas throughout the country has remained on an even keel, and even though growth has been mediocre overall, it has still been a solidly performing asset class.”
Renecle also points out that South Africa has not experienced negative equity on residential property due to inflation. “With rising inflation, it’s doubtful that residential property will see negative equity in the near future either.” That said, growth prospects for residential property in 2016 are expected to remain muted in line with global economic trends.
Despite much speculation to the contrary, Renecle doesn’t believe that there is a residential property bubble on the horizon for South Africa. “Demand in some areas continues to outstrip supply, added to which the level of residential property development has been controlled and fairly subdued due to the financial institutions’ caution around financing developers, based on their past bad experiences and fallout from the 2008 international recession.”
Renecle says that even though a constrained economy and tough financial climate has affected many consumers’ ability to qualify for home loan finance, the rental market has picked up the slack during 2015 and will continue to remain strong throughout 2016.
“There has been more development of residential apartment blocks purely for rental accommodation in the northern suburbs of Johannesburg, with a noticeable move from institutional investors into this space. We have also seen a number of large private investors invest into schemes that have been developed purely for rental purposes.”
Renecle notes that there is sufficient demand in and around Johannesburg’s main business nodes and CBDs for continued development of rental accommodation to take place.
The interest rates, which have an impact on consumer spending and home loan finance affordability, will remain in an upward cycle during 2016. “The higher rates, no matter how small the increases, will translate into less movement in the residential property market coupled with lower growth. However, buyers who are relying on finance should bear in mind that since late 2010 we have had one of the lowest interest rates that we have seen since 1979.”
While overall the property market outlook may not seem too exciting, there are area trends that will be worth taking note of in the year ahead as there were during 2015. “Prime examples this year have been the boom in development in the Bryanston, Rivonia/Sandton and Rosebank precincts. Many investors in these developments have benefitted from high growth rates that are well above the average over a short period of time.”
Renecle concludes by saying that those looking to purchase property during 2016 can’t go wrong, provided they do their research about the micro market in which they want to buy and make well thought out, researched and informed investment decisions.

  Comment on this Article

  Please login to post comments

Post to my facebook wall
Characters remaining

    Latest Property News
    • 17 Nov 2017
      FWJK has announced the launch of its latest residential brand, the Lil’ Apple, which will be launched simultaneously in two developments in Cape Town and Umhlanga totaling 600 apartments. The Lil’ Apple is set to be a brand of FWJK’s New York style apartments which will be rolled out nationally.
    • 17 Nov 2017
      It’s been a tumultuous year on many fronts, with socio-political uncertainty setting the tone for much of South Africa’s economic activity yet despite this and seemingly counter-intuitively, the residential property market has held up well.
    • 17 Nov 2017
      The EAAB (the Estate Agency Affairs Board) recently claimed that around 50,000 illegal estate agents could currently be operating illegally.
    • 16 Nov 2017
      Penthouses are synonymous with New York – characterised by high-rise living that is decidedly luxurious and spacious. While exclusivity comes at a price, you can still create a “penthouse” look and feel in your existing apartment or even the upstairs bedroom of a double storey house with some clever design changes and styling touches.
    • 16 Nov 2017
      The area has long been popular with kite surfers and, with escalating property prices in Cape Town itself, is increasingly in demand with home owners who work in town, but are looking to invest in more affordable properties.
    • 16 Nov 2017
      Cape Town’s popularity as a world-class tourist destination has resulted in a spike in the number of homes available for holiday lets and fuelled investor demand for sectional title units with short term rental potential.
    • 15 Nov 2017
      Sappi, one of South Africa’s oldest global companies and a leading global supplier of sustainable woodfibre products, has moved its global and regional headquarters to a new site on the corner of Oxford and 14th Avenue in Rosebank.
    • 15 Nov 2017
      There’s an old saying in real estate that you should seek to make a profit when you buy, not only when you sell – and a large part of succeeding at that endeavour is buying a home in an area with desirable features that will enhance the resale value of your property.
    Subscribe to the MyProperty Newsletter

    Last Name  
    Email Address  
    Email Frequency
    Share this Page

    For Sale Property
    Rental Property
    More Options
    Connect with us