Carin Smith
Paarl - Due to a vicious cycle in the economy, one could say there is currently little oxygen in the SA residential property market in general, according to Paul-Roux de Kock, analytics director for Lightstone.
Lightstone provides information, valuations and market intelligence on about 6.8 million of the 8 million properties in SA.
"On a national level, there are no real sparks flying in the SA residential property market," he said at a property industry conference held at the Val de Vie Estate outside Paarl on Thursday.
Lightstone’s forecast for 2016 is that nominal house-price inflation will top out at around 3.5%, resulting in real deflation of home values as the SA Reserve Bank (Sarb) battles to keep the consumer price index (CPI) within the 6% upper band.
"If we see a positive turnaround in the economy, the best-case scenario is that the drop will be subdued and the year will end off at around 4.6%. If we have to weather any more major economic storms, however, house-price growth could drop to 2.5% or even lower," said De Kock.
He explained that if one looks at the residential property and mortgage market in SA, gross domestic product (GDP) growth is steadily slowing and to make matters worse for the industry, inflation is increasing at the same time.
"The last remaining lever for the Sarb is, therefore, to increase interest rates," said De Kock. "Expect a raising rates cycle which some economists say could come even sooner than expected."
He pointed out that aspects like a decline in vehicle sales and building plans passed reflect the state asset buyers find themselves in. On top of that the under-valued rand plays a part as well.
"When Sarb increases interest rates, it takes money out of the pockets of asset buyers and that means it takes a bit of the property buying pool with it," explained De Kock.
High value proportion