Well, we made it! The lazy days on the beach are a pleasant memory, the fireworks have faded and the last of the new year’s steamers and champagne corks have been swept out the door. 2017 is here, bearing with it a bouquet of possibilities – along with a couple of warning cards.
For the property industry, the good news is that we enter the year having avoided the nightmare scenario of a ratings downgrade in 2016. The risk of a downgrade has not, however, disappeared. As a country, we need give our full support to efforts to stave it off. An encouraging collaborative effort between government, business and labour has played a major role in keeping us at investment grade – perhaps this is a model for putting us on the high-growth trajectory that we so urgently need.
Unfortunately, 2017 does not seem – at present – to promise a major acceleration in growth, although even the very modest rates projected (perhaps 1%, according to FNB) would be a welcome improvement over what we’ve seen this past year. And many of the risks to our economy’s health, such as the possibility of a policy misstep here or abroad, remain.
But there are some positive signs.
Better rainfall suggests that food price inflation will be lower this year, especially after harvests start in May. Not only should this reduce the overall inflationary impulses over the year, but it will be a major relief to lower-income earners, giving them some breathing space in servicing their bonds. Indeed, one of the saddest aspects of the past year was the stress that so many honest, hard-working South Africans have been under, with many having to surrender policies and dip into savings to keep going. Many, regrettably, found themselves unable to keep up their payments on their bonds.
But if inflation can be tamed in the coming year, the prospects of rate hikes recede. So far, expectations are for rates to stay pretty much where they are. This is welcome news for every home-buyer, no matter what part of the market he or she operates in. It also makes the estate agent’s job that much easier.
The property market has been going through tough times. 2017 will likely be a little better, though without a major growth surge in the broader economy (remember the good times in before the financial crisis… ah, fond memories!) there are limits to this.
As FNB’s John Loos has noted, the housing market has generally been indifferent in the field of transaction growth, but fairly strong in that of debt servicing – and this is not expected to change. Stressed buyers will (wisely) consolidate their positions.
The Western Cape, however, is something of an outlier. That’s a relief for those of us operating in it. Our experience is that demand for properties remains robust, although buyers are cautious about putting their money down in the current environment. They demand an assurance of value.
For the property industry, this means that agents will need to be at the top of their games. Expect competition for stock to be intense, and accept this as a necessary – even positive – part of the game in the year ahead. Make sure that clients understand clearly what is possible under current conditions. They are entitled to the honesty and frankness that is intrinsic to service excellence.
Above all, embrace the challenges and opportunities that the year will bring. Remember that this is an industry with long-term horizons, and maintaining relationships with people – clients and agents alike – are the soul of the industry. We withstand the bad and enjoy the good together.
A very happy 2017!