Property 24/10 - 488

Lisbon, Sydney and Moscow set to lead residential property price growth in 2020
In 2020, capital values across the 27 cities in the Savills World Cities Prime Residential Index are forecast to grow by 1.8% on average, says Dr Andrew Golding, chief executive of the Pam Golding Property group, which is in association with Savills.

“This metric is reported in an update to Savills’ Impacts research programme. The Index reflects a slight improvement to the 0.1% average seen in 2019, but is still well below peak increases of 9.3% in June 2013.”

However, according to the Index there are markets which continue to defy the trend. Lisbon, Sydney, and Moscow are all projected to have growth greater than 6% in 2020, thanks to a combination of low interest rates and increased demand.

“Ranked 11th on Savills Index, Cape Town is expected to achieve growth in 2020 between 2% and 3.9% along with other major global cities such as Berlin, London, Singapore and Shanghai,” adds Dr Golding. “Clearly evident as seen below is that Cape Town offers international property investors exceptional value for money, with residential property to be had at €3 000 per square metre compared with between €9 000 and €24 300 (New York) and even above in other leading global cities.”

SA rental growth predictions for 2020
Based on the sideways rental growth of 2019, PayProp predicts more of the same for most of 2020.

“We’ve entered the new year with the continued threat of power cuts and an unstable economy that is unlikely to attract foreign investment in the short term,” says PayProp’s Johette Smuts.

Affordability is and will continue to be an important factor in South Africa with sub-inflation income growth increasing the pressure financially on consumers, and particularly in those provinces where rental growth outpaces inflation. Added to this, the oversupply of housing in some of the bigger provinces continues to suppress rental growth.

“Supply is relatively inelastic, and demand will be slow to change in the short term,” says Smuts.

7 reasons why buying your own home beats renting
Even as South Africa’s economy floundered last year, the real estate market gained many new participants as large numbers of young people, especially, went ahead with their plans to stop renting and buy their own homes.

And in the coming months they should continue to do so because owning a home is almost always preferable to renting, and if you are going to buy, it is always better to do so sooner rather than later, says Carl Coetzee, CEO of SA’s home loan originator BetterBond.

Coetzee says some of the reasons people who are renting should embrace home ownership as soon as possible include the following:

1. Pay off your home
It is better to start paying off your own home, which will become an appreciating asset in your name, than to keep renting, which is effectively just helping to pay off someone else’s property.

How to manage the risks when buying to let
The current buyers’ market offers a good opportunity for investors looking for properties to rent out, especially with the prospect of a potential rental growth recovery in the latter part of 2020. But investors need to remain cautious, every opportunity comes with risk.

Growth in the rental market was below inflation for the greater part of 2019, with a slight uptick in Q3 2019. Have we seen the bottom of the cycle? Just Property CEO Paul Stevens thinks so, while he predicts growth will remain flat for the next six months. Stevens is optimistic about a rental growth recovery in the second half of 2020.

Generally speaking, property prices are increasing at a rate below inflation, which means that in real terms, there is actually negative growth in the South African property market. “This places us in a buyer’s market, where demand is low and sellers have to be more realistic when pricing their properties for a timely sale. This is good news for buy-to-let property investors; if they buy right, they may benefit from a good return on their investment in time,” says Barbara Ingerisch of Just Property Blouberg.

It’s a good time to look for properties that could be rented out, but be aware of the risks inherent in the market and take what action you can to mitigate them.

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