ALEXANDER SWART DIRECTOR PREDICTS A BIG UPTURN IN R1 TO R3 MIILION PRICE BRACKET BY MIDDLE OF 2020
Category News
The prediction of "green shoots" marking the recovery in the Cape Town Northern Suburbs residential property market are wholly valid, says Rowan Alexander, Director of Alexander Swart Property. The first prolific flowering of these "greenshoots" should be seen from the third quarter of 2020.
Wrapping-up 2019 with the Alexander Swart staff, Alexander said that 2019 should be seen in two halves. In the first half of the year a range of factors following the 2018 drought in the Western Cape, a major disrupter, had caused concern. The chief being the ongoing reports on State capture, many of which indicated that the Zuma-Gupta alliance had led to massive illicit personal enrichment from almost every State department. It then became clear that this rip-off philosophy had infiltrated not only some of the provincial administrations but also many of the municipalities. Those looking for more positive signs in the economic outlook, had to deal with the threat of land expropriation without compensation, the apparently unsustainable increase in the SA, Eskom and other State owned enterprises' debt, the fall in the value of the rand, the very low GDP growth rate, the worsening trade deficits and a growing lack of employment and dire poverty -all of which could lead to SA declining into junk status in the global economy.
"In the residential housing market these negative factors led to a large number of South Africans (as many as 16 % of all home sellers in the price brackets above R3 million at one stage) trying to sell their homes in order to emigrate or to raise funds for placing offshore'', says Alexander. "The election, however, proved to be a turning point. Our first hopeful sign in a long while. The choice of Ramaphosa, known to be pro-business and pro-private enterprise, first as the leader of the ANC and then as President, boosted confidence and "the gears began to become aligned". A slight but nevertheless noticeable property upturn in the second half of the year was brought about by many upper middle and upper bracket owners who had listed their homes for sale but had received either no or only very unsatisfactory offers, now withdrawing their homes from the market. This, in turn, made buyers begin to realize that their choices were now more limited and their ability to bargain more restricted -- which created a sense of urgency among them that we had not seen for some time."
The housing sector most affected by the difficult conditions was homes priced above R3 million - and the higher the value, the more they felt the absence of the serious buyers. It became quite commonplace to hear of homes brought to the market at around R4 million selling at a discount of R800 000 or more, or not finding a buyer at all. Some R6 to R12 million homes have stuck on the market without success. These upper bracket problems inevitably had a negative spill-over effect on the sub-R3 million bracket. For several months' agents saw extended sales periods and deals done at 5 to 10 % discounts in this formerly popular sector. BUT Alexander is now confident that by June 2020 this category of housing will be on a marked upward trend - the anticipated revival heralded by the recovery greenshoots he has already mentioned. This, he added, is already being assisted by the banks' new willingness to lend money for bonds on easier conditions than previously. Suitable First Time Buyers can, for example, now get from all the major banks, 105% loans which do away with the need for a deposit and cover the legal and bond application costs.
"Alexander Swart advised conservative investors to align themselves with the R 1,5 to R 3 million market where the action will be seen in the coming year, especially if the homes are very secure or in gated security estates and\or largely maintenance free. Such homes will command premiums in the coming year."
So much for his bullish predictions, but does Alexander have any no-go predictions, any warnings for the future? He says there are now clear signs that the sectional title market will be forced to accept vacancies and big sale discounts in the coming year; in the view of many there is now an oversupply. What was once the best investment category, now has too much stock on hand. However, investors must accept that these trends are cyclical and that better times will return. He predicts, by 2022 good returns will again be the norm in this market.
The upper bracket, especially those houses in the R3 to R5 million range, does offer great long-term prospects: those who buy now will do so at huge discounts and if they can afford to wait that long, could see impressive price rises in times ahead. This Alexander said, is the right market for the bold speculator but the conservative investor should stick to the R 1,5 to R3 million bracket.
For further information, contact Rowan Alexander on 082 581 3116 or by email : rowan@asproperty.co.za
Author: Independent Author
