Reaction is the key to life in the current SA homes market
Category Blog
“Life is 10% what happens to people and 90% how they react to it” - Charles Swindoll (Texan author, pastor and educator).
There is now no longer any speculation on the inevitable Cabinet re-shuffle by President Jacob Zuma. It has happened – with the widely-feared dismissal of Finance Minister Pravin Gordhan and his deputy Mcebisi Jonas sadly at the centrepiece.
The resultant, virtually inevitable, global ratings agency downgrade process began almost immediately – with Standard & Poor at the forefront. The spectre of other downgrades to follow will put more pressure on home prices.
Nevertheless, now that the large blanket of South African economic uncertainty is lifting, the property market can at last see the lie of the land, albeit it a pretty daunting picture.
But how are we – as buyers, sellers and marketers of residential property – likely to react to the change in the market sentiment and landscape? That is the key.
Poised to bounce back
Fortunately, unlike Cape Town, the Johannesburg homes market is nowhere near topping out from a boom period – as it did in 2007. But it is pretty perfectly poised to bounce back off a long period of flat-lining prices.
Fundamentally, Johannesburg home prices right now are the most undervalued they have been in the past 20 years. There are opportunities galore to buy at a discount.
Buyers who find the home that suits their needs and lifestyle should climb aboard now, while interest rates are still relatively low. However, consider that interest rates are likely to increase. Those who choose to wait for further declines in price may well miss the bus.
Obviously, there is an element of risk at present. But Cape Town is in a far more vulnerable situation than Johannesburg. They have been in an opposite cycle and are now ripe to come off their boom.
By contrast, there is no fat in the Johannesburg market – and there is, therefore, less risk and more potential.
Meanwhile, banks are granting bonds. This confirms they are seeing value in the residential property transactions that are happening right now. In fact, there has even been a slight easing of loan-to-value ratios recently.
Investment opportunities
The value gap between new and existing properties in Johannesburg is now 30 per cent. This clearly presents extraordinary investment opportunities as more and more owners opt, or are forced, to sell in the current uncertain economic and political climate.
Therefore, my message to first-time buyers is: Be courageous and take the plunge, because extraordinary opportunities abound right now. Conversely, my advice to homeowners holding on to their properties is: Don’t fret. Avoid being pressured into a panic sell situation.
Meanwhile, being a contra-cyclical-minded real estate agent in this climate is not a bad place. Firstly, you have the flexibility to choose who you want to work with. Secondly, homeowners are inclined to sell because of their own uncertainty.
Furthermore, astute buyers, who are not risk averse and who can see the opportunities on offer, will rarely let them slip. They know that, at this moment in South African residential property market history, ‘right now’ is pretty good timing.
Author: Ronald Ennik
