Property Talk

We are desperately close to a major recession

There is something magical about property ownership that inspires us to strive for success and push ourselves, often sacrificing current consumption for the prospect of owning our own homes.

Having witnessed the growth along the KZN North Coast first hand over the past 25 years I am convinced that the property ladder is an extraordinary way to build long-term wealth.

The ability to leverage a property purchase with mortgage finance at relatively stable and predictable interest rates makes for a perfect environment to get onto the property ladder and to start nurturing your investment.

It was with interest that I noticed the FNB May Property Barometer report on the recent surge in first time buyer participation. This is excellent news as we know that first time buyer behaviour is a leading indicator of general economic growth.

With the SA GDP growth figures reported recently by Stats SA as being -3,2% for the first quarter of 2019, the worst in a decade, we are desperately close to a major recession in South Africa and therefore need every bit of good news we can get.

Two quarters of negative GDP growth rates is classified as the definition of a recession and it will be interesting to see what Q2 delivers. We can however already see the new green shoots of market demand and activity and I anticipate that we may just escape the stigma of a recession label.

If your business has been under pressure and you feel as if you have been ten rounds with Mike Tyson, at least you can console yourself with the fact that we are all in the same boat.

According to FNB the first time buyers reached 22.7% of all buyers in the first quarter of 2019, up from 17.6% in the first quarter of 2018. This is above the long-term trend of 21.2%. The crazy peak experienced in 2005 at 35% is assigned to history and unlikely to be repeated anytime soon.

Interestingly Pretoria remains the number one hotspot for first time buyers, with 29% of sales attributed to this category of buyer activity (although down somewhat from its peak of 31.7% at the end of 2017).

Pretoria may however be replaced by Johannesburg as the area with the most first time buyer activity, as this has increased from 21.3% in the second quarter of 2018 to 25.5% in the first quarter of 2019. Even Cape Town has seen a surge in first time buyer activity. Recorded as 7,5% two years ago this has now increased to 16% for Cape Town as at the first quarter of 2019.

KZN offers first time buyers exceptional choice and opportunity. New developments in growing areas with access to a range of superb amenities are the ingredients to look out for when earmarking the best areas to invest in. The North Coast is offering this mix and for this reason is experiencing the migration of families at a steady rate from suburbs to the south but also and more importantly from Gauteng.