What lies ahead...
Category News
At this time of the year, it's always good to take a look ahead and see how the real estate market is likely to shape up over the next 12 months, not least because what is good for real estate is generally also good for many other aspects of our lives.
If rentals go up, for example, as they are predicted to do next year, property investors and landlords make better returns and are inclined to buy more rental units - and provide a bigger choice of accommodation for the those who aren't ready to buy a home yet, or simply prefer the flexibility of renting.
Rising rentals also make it easier for investors to keep up with levies in apartment complexes and estates, and this boosts property values in those developments, which helps other owners there who might be ready to sell their units - and buyers who need a home loan to purchase them.
On the other hand, when rentals go up at the same time as interest rates come down, as they are doing at the moment, some tenants will find that a bond repayment on a home of their own would be the same as their rent and decide to buy. This creates fluidity and upward movement in the market and opens it up to more entry-level participants.
Falling rates also mean smaller monthly repayments on other debts such as car finance, credit card balances and personal loans, and improve the financial position of many consumers, and when this is combined with a declining rate of inflation, it further improves housing affordability - and demand.
Add in an average 6% wage increase such as that forecast for SA employees next year, and you are very likely to get an increase in spending, faster economic growth, and a significant increase in the number of people who feel positive about the economy - and their family's future.
Such positive sentiment inevitably gives rise to a strong upturn in the real estate market, giving the whole economy a further boost through job creation. For every home purchased, it is estimated that at least three jobs are created, not just in construction but in the provision of home-related goods and services such as furniture, appliances, electricity, water and telecommunications.
Higher rates of home ownership would, incidentally, also mean more income for SA's struggling municipalities, and that would be a win for everyone in terms of better service delivery and safer, cleaner, and more attractive living environments.
Consequently, I'm happy to say that this exactly the real estate scenario currently developing in SA and that I think the year ahead will be a really positive one for us all, not just in property but also in terms of mobilising our country's huge potential.
Author: Berry Everitt