10 years of no growth has damaged fundamental belief in property
Traditionally, property has always been a cornerstone of anyone’s investment portfolio. But an investment demands a return. Since the financial crisis of 2008 residential property has performed very poorly, not quite keeping up with inflation for 10 years. At 4.8% growth (against inflation at 5%) the market has, in fact, flat-lined over the longest period in my 35-year career.
Granted political sentiment has now improved by a quantum leap, and economic forecasts are showing steadily increasing optimism. So why has property market sentiment not immediately followed suit? 10 years is a long time, even in property. Memories of how vital an asset class it is in any portfolio have faded. The old days of riding the three-year cycles cleverly (with astute gearing) have long gone. Millennials, now economically active in their 30s, have never experienced the benefits of good property investment.
A pent-up tide
Johannesburg / Sandton is sitting on a pent-up tide of would-be home buying – particularly among the millennials. And it is simply waiting to roll out. Granted, dinner table talk these days on residential property market has hardly been invigorating. It will take a little while (perhaps a paradigm shift) for faith to be restored. That is why the turnaround is starting slowly. It will gather momentum – particularly after there is clarity on the property expropriation front. This will happen.
The average number of buyers responding to show days and portal advertising has doubled since last year. This will slowly translate into transactions. Millennials who are poised to buy a home for the first time are seeking to be convinced that there is a likely return on the investment.
The national climate of political and economic uncertainty that continues to prevail will start to ease and traction will improve by the end of the year. Millennials today account for about 50 per cent of home purchases in Johannesburg / Sandton, and they will be a key driving force when the market does, inevitably, strengthen its turnaround.
Winter sale opportunities
Meanwhile, winter is a good time to sell. Home sellers should not ignore the residential property market during the winter season. It is, in fact, one of the best times to sell a home. Sellers generally tend to have a mindset that, because gardens are usually drab and colourless in winter, their homes will be uninviting to potential buyers. They are therefore inclined to steer clear until spring or summer. As a result, the buyer-to-stock ratio tends to be far higher in winter. It is a time when sellers face less competition because there are fewer houses on the market for buyers to compare with.
Sellers who have the will and foresight to market their homes in winter stand to encounter wonderful opportunities. By contrast, those who choose to wait until after winter before putting their homes on the market could end up competing with the best gardens in town. That is because competition gardeners and garden enthusiasts invariably time the sale of their homes for the Spring season.
Author: Ronald Ennik