Home prices in Jozi the cheapest in 30 years
Category Blog
Spring is in the air, and now summer is arriving, which has historically been the most buoyant season for transactions in residential property.
It is a time when buy / sell opportunities will abound for the market to continue improving at the momentum it had before the Covid Delta variant and the very disturbing unrest in Kwa-Zulu Natal and Gauteng descended on it. A totally expected 'lull' followed after the lifting of Level 4 as negative sentiment and uncertainty prevailed.
Until now, homeowners and buyers have widely remained reluctant to transact in the perceived shadow of worry and stress under the COVID umbrella. As a result, current home prices in Johannesburg and Sandton have been the cheapest I have seen in the past 30 years (considering a basket of 'big ticket' items home owners spend on...cars, appliances etc ). So much so that many homes have been selling at prices lower than sellers originally paid for them, even if they had bought going back as far as 2014/15.
Take the plunge
That, alone, is a strong motivational reason for both wait-and-see, as well as must-do, home buyers to come forth and take the plunge. Meanwhile, extra stock is coming into the market, as it traditionally does at the beginning of summer. The reality remains that the residential property sector is driven by sentiment which, in recent times, has been in low forward gear and, sometimes, in reverse.
Right now, the market is ripe, ready, and seemingly well poised, for a much-needed, and long overdue, upturn - albeit at an inevitably modest, and cautious, pace to begin with.
A further springboard for that may well be a sentiment uptick following the impending release of the long-awaited recommendations that are due to emerge from the, now completed, close to R1-billion costed, and three-year-long-lasted, Zondo Commission of Inquiry into State Capture.
Positive data
A good sign of the times is that the International Monetary Fund (IMF) recently increased its growth expectation for South Africa from 3,l% to 4,2% on the back of positive data in the first half of the year.
With President Cyril Ramaphosa now firmly at South Africa's helm, he wields a big stick and is well poised to strengthen his leadership, and instil more confidence, in his team - both within and beyond his Cabinet. This bodes well for national sentiment which is effectively in his hands. And it is sentiment which is the launch pad of improving home prices.
Meanwhile, the President should step up, wave the flag, and be crystal clear that he has got a handle on our country. The roll-out of vaccinations is a case in point. If it continues at the pace at which it is currently being delivered, South Africans will be going into the next pandemic more thoroughly prepared.
Positive mode
It is a valid consideration that the residential property market price growth has languished below inflation since the Financial Crisis in 2008. The residential property market moves on sentiment which has generally been negative all this time. Now after the upheaval of the pandemic it has subside to a 30 year low and is primed to start a sustained growth period. This is massively supported by the lowest interest rates in 60 years.
Many sellers may be hesitant to sell considering what they originally paid for their properties, but renting is really cheap now and capital (from a property sale) invested in a specifically targeted portfolio could appreciate generously in the short term. Residential property buying opportunities, though, are abundant at the moment, but should be considered with a medium to long term perspective.
It is currently the best time in a lifetime to buy, considering the two simple, dominant facts. We are experiencing the lowest interest rates in 60 years and the lowest property prices in 30 years. The first time these two have coincided in my long career.
Author: Ronald Ennik
