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The state of the South African economy does not bode well for the property market. On Tuesday 04 June 2019, Stats SA announced a 3.2 percent decline in GDP for the first three months of the year, which is the largest quarterly drop in a decade. The questions is, will the housing market survive this downturn?
According to Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, we are merely feeling the consequence of the culmination of poor decisions and mismanagement of resources, both human and material, over the last few years; to have expected any sort of immediate recovery would have been overly optimistic.
“However, time and time again, the South African property market has proven to be resilient. I recall the 2008/2009 market crash where the prime lending rate rose to 15.5% by mid-2008 and we experienced a 9.4% average house price decline between February 2008 - May 2009. Yet, the housing market bounced back, yielding some ‘boom’ years from 2010 onwards. I therefore have no doubt that the real estate market will bounce back following this period of economic decline,” says Goslett.
While we await the inevitable recovery, here are a few things buyers and sellers should know about our current economic conundrum:
HOW THE NEGATIVE ECONOMY EFFECTS SELLERS:
In the world of real estate, a negative economy translates into a buyers’ market where the supply outweighs the demand. Unable to afford the costs of a mortgage, more homeowners end up in financial distress and place their properties onto the market, with some falling claim to bank repossession and distressed property sales. There are also fewer buyers on the market during this time as many simply will not be able to afford the costs of purchasing property. This means that homes are likely to take longer to sell and might fetch lower prices as a result.
In order to lower the risks of loss, global investors generally look towards growing economies first when considering investment options. This means that those who are hoping to sell upmarket properties or commercial real estate to foreign investors will also struggle in this economy.
HOW THE NEGATIVE ECONOMY EFFECTS BUYERS:
While a negative economy does not spell good news for sellers, buyers who can afford to purchase now will be able to acquire property at much lower prices. However, they too will be feeling the pinch of the economic decline, which will make it trickier to afford the bond repayments on their new home.
ADVICE FOR BUYERS & SELLERS
Especially now that money is tight for everyone, to save themselves the expense of having to drive out their petrol to view homes they would never have wanted to view, buyers should be very specific about their wants and needs when explaining their wish list to their real estate professional.
Sellers should be more rigorous in their search for a real estate agent now more so than ever before. In trying markets like the one we are currently facing, sellers will need to partner with the best in the business to ensure that they get the right price for their property.