2016 was a difficult year for the property industry. This much is apparent from data on South Africa’s housing market – and it is not clear whether 2017 will be any better. But it also underlines the need for strategic thinking on the part of both buyers and sellers, since opportunities can exist in the most unlikely of environments.
According to FNB’s recently released Property Barometer, average house prices in South Africa increased by an average, nominal rate of 5% in 2016 – representing a slowdown on the 6.5% recorded in 2015, and 7.2% in 2014. FNB points out that, accounting for inflation, house prices actually experienced a modest decline of some 1.2% during 2016.
Indeed, a look at trends month-by-month over 2016 shows an accelerating rate of decline in the second half of the year.
FNB estimates the average house price in December at around R1 055 210.
This is unsurprising in view of the general turbulence in the economy, and the strains that consumers are under. But bond payments represent one of the largest expenses for households, and are central to their wealth-building plans. It is thus concerning for property owners that they are seeing very little growth in the value of their investments.
With slightly more optimistic economic forecasts, the coming year may be a little better, although probably not greatly so. (FNB anticipates that house prices will grow at a somewhat slower rate in 2017 than in 2016.)
Fortunately, the property market is dynamic, and the overall trajectory is upward. The Property Barometer notes that the average real price is now a hefty 61.5% above the level at the end of 2000. The gain in value over this period – a period shorter than he lifespan of a standard bond – has been exceptional. The key is to remember that property is an investment for the long term.
Concerns about the present – about 2016 and 2017 are valid – but they are a temporary phenomenon. There is little doubt that prices will rebound in time, demonstrating that nothing can match a good property deal as an investment.